Wedbush has allowed SpaceX and Tesla to merge within 12-18 months. Why would Musk want to do that?

Following the merger of Elon Musk's space company SpaceX with his AI startup xAI, there is a possibility that electric car and robot maker Tesla will merge with SpaceX next. Wedbush analyst Dan Ives, popular among retail investors and one of the most prominent tech optimists on Wall Street, wrote about this on Tuesday. And, in his opinion, the mega deal could happen as soon as the next year and a half.

"In our view, there is a growing likelihood that Tesla will eventually merge with SpaceX/xAI in some form," Wedbush analyst Dan Ives wrote on Social Network X. - The emerging artificial intelligence ecosystem is expected to span both space and Earth ... and Musk will try to combine [the companies'] efforts."

If SpaceX is evolving into a company dedicated to building AI infrastructure in space, its merger with xAI is logical, Barron's believes. However, Tesla is also positioning itself as an AI company. Its fourth-quarter report focused on AI-related prospects, from robotaxis to humanoid robots. Therefore, the SpaceX and xAI deal could inspire bullish Tesla investors who expect all of Musk's AI companies to be merged, the publication noted. In addition, Tesla previously reported a $2 billion investment in xAI, meaning it will own a portion of SpaceX after its merger with xAI.

"Musk is seeking to increasingly control the artificial intelligence ecosystem. He may gradually come to merge SpaceX and Tesla - in one form or another - over the next 12-18 months to bring together two key technologies that claim to lead the AI revolution," Barron's quoted Ives' commentary as saying.

"Tesla continues to play an important role," notes an analyst under the nickname The Techie at Seeking Alpha. - The company is becoming an industrial mainstay of Musk's entire empire, especially with its [Tesla Energy] energy storage business - it's the missing link needed to power orbital data centers." The Techie emphasizes that investing in xAI and refocusing on the production of Optimus robots transforms Tesla from an automaker into a provider of physical AI solutions that will be deployed in Musk's Earth and space infrastructure. In his opinion, the SpaceX and xAI deal confirms it: Musk is building a vertically integrated innovation platform that utilizes space to solve AI power and cooling problems. According to the analyst, the "orbital computing" narrative has renewed interest in space - and will be in the spotlight as the idea of space data centers becomes more of a reality.

"Strategically, this strengthens SpaceX's long-term prospects as a candidate for going public: it now has a clear AI-driven growth vector to complement its launches and satellite services," The Techie summarized.

Full consolidation of assets like SpaceX and Tesla faces a valuation mismatch problem, says Future Fund Active ETF co-founder Gary Black. By his calculations, Tesla trades at a multiple (P/E) of about 200 to expected 2026 earnings, while SpaceX trades closer to 400 at its current valuation of $800 billion.

"The math is pretty simple," Black explained to Barron's. - To merge at current estimates, Tesla would have to issue about 35% more shares. Many of Tesla's institutional investors will find it risky that 25% of profits will come from space transportation and communications, and may start selling securities."

While many investors already view both Tesla and SpaceX as AI companies, a full merger may be premature, Barron's said.

Musk was considering merging SpaceX with Tesla instead of xAI, sources told Bloomberg. This news caused Tesla shares to rise by 3% on Friday, January 30. In trading on February 3, after the official confirmation that SpaceX will buy xAI, Tesla shares were cheaper at the moment by about 1.6%.

This article was AI-translated and verified by a human editor