Barclays raised its rating on Tesla to "Overweight" on Monday, lifting its price target from $370 to $450, with the core rationale centered on the strategic premium that could be unlocked by a potential merger between Tesla and SpaceX.
This adjustment is not merely a patch to financial models, but stems from expectations of deep integration between the two companies in artificial intelligence and autonomous driving.
Analyst Dan Levy noted that beyond the direct valuation boost a merger could bring, the combined entity would be better positioned to respond nimbly to the pressures of the auto industry's transition toward software-defined vehicles, while Tesla's automotive and energy business fundamentals also continue to improve.
Musk confirmed during SpaceX's earnings call on October 20 that the two sides have established a dedicated committee to explore the merger, though no specific deal terms have been finalized, and the market is closely watching the progress of this structural transformation.
Data compiled by Woofun AI shows that Tesla's strategic focus is shifting from scale expansion to deep technological cultivation.
In 2024, the company abandoned its aggressive target of selling 20 million vehicles annually by 2030, instead setting a new benchmark of 5 million vehicles per year by the end of the decade, with its growth engine fully switching to autonomous driving and software services.
Third-quarter results show that active users of Full Self-Driving (FSD) reached 1.74 million, up 67% year-over-year, with roughly half opting for monthly subscriptions and the rest choosing one-time purchases.
Although the automotive business still contributes about three-quarters of revenue, well-known Wall Street tech analyst Dan Ives emphasized that the software business is the "real profit engine" because of its exceptionally high margins.
Ford (NYSE: F), General Motors (NYSE: GM), and Alphabet's (NASDAQ: GOOGL) Waymo are all accelerating their push into autonomous driving subscription or paid services, and the industry's competitive focus has clearly shifted toward high-margin software ecosystems.
For Musk, the greatest value of a merger lies in breaking down organizational barriers to freely allocate engineers, computing power, and capital to address the two companies' increasingly converging technological needs, particularly the jointly pursued Terafab semiconductor project.
The proposed facility aims to supply chips for Tesla's Cybercab robotaxi, Optimus robots, and SpaceX's computing systems, and integration would eliminate internal friction over resource allocation and boost R&D efficiency.
However, this flexibility in resource deployment comes with significant financial and execution risks.
If the merger goes through, Tesla shareholders would be directly exposed to the pressure of SpaceX's massive AI R&D spending.
The two companies' current partnership already shows the early outlines of resource synergy, but once the risk-isolation mechanism between separate entities disappears, the capital market's tolerance will be put to the test.
On the international financial platform Polymarket, traders' expectations for the timing of a merger are divided: the probability of a formal merger announcement by December 2026 is only 15%, while by the end of 2027 that probability rises to 63%, with related trading volume of about $1.56 million.
This probability distribution reflects the market's cautious assessment of regulatory approvals, negotiation complexity, and strategic necessity.
Musk has set a 2028 target for Terafab chip production but acknowledged that the timeline is uncertain.
Seaport Research Partners semiconductor analyst Jay Goldberg warned in an exclusive interview with Benzinga that commercially meaningful mass production could be delayed until 2030, saying, "I think there's a chance he does it faster than others, but I also think he may not be able to do it that fast," revealing the risk of a timing mismatch between hardware execution and software vision.
From a long-term perspective, a potential merger between Tesla and SpaceX marks a shift by tech giants from competing on single product lines to an integration contest over underlying technology infrastructure.
If successful, this vertical integration model would redefine the cost structures and R&D cycles of the automotive and aerospace industries, but it would also require investors to endure higher volatility and execution risk.
This is a typical case of Silicon Valley once again attempting to drive a software ecosystem explosion through unified hardware foundations since Apple's (NASDAQ: AAPL) development of its own chips, and its success will depend on the actual delivery capability of the Terafab project and the regulatory environment's willingness to accept cross-industry mega-mergers.
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