For more evidence that Tesla might not be a car company, consider the recent report that Tesla could be thinking of leaving its largest, most productive car plant in the world's largest market for new cars and new EVs behind, in favor of an all-artificial-intelligence future.
The Wall Street Journal reported that Tesla was preparing its China business for a possible sale, smoothing the path for a merger with SpaceX.
It's hard to overstate how significant that idea is. China accounted for more than 20% of Tesla's 2025 revenue. Its plant in Shanghai produced more than half the cars sold that year. Domestic Chinese sales accounted for more than 35% of Tesla's total, with the rest being exported.
Tesla and SpaceX didn't respond to requests for comment. CEO of both companies, Elon Musk, took to X to deny the report, saying the topic of a Chinese separation "has never even come up in a discussion ever," and calling it "fake news."
Despite the denial, both stocks moved in early trading on Friday. Tesla stock was up 1.8% at $314.40 in premarket trading while S&P 500 and Dow Jones Industrial Average futures were up 0.4% and 0.5%, respectively. SpaceX stock was up 1.9% at $112.20.
The idea of a Tesla/SpaceX merger certainly isn't new. More than a few Wall Street analysts see the combination as inevitable. Musk was even asked about it on Tesla's recent second-quarter earnings conference call. He responded by saying large mergers aren't what you discuss on earnings conference calls.
The logic behind a combination isn't hard to suss out. Both companies are all about AI. SpaceX generates frontier AI models and plans to put data ceters into orbit. Tesla is working on physical AI applications such as robo-taxis and robots. The companies already work together on things such as a semiconductor-making facility in Texas. And there is the most obvious reason of all: Elon Musk. He controls both companies.
Still, what would be the largest merger in history wouldn't be simple to complete. The Chinese problem is just one issue to overcome. SpaceX does a lot of business for the U.S. military, which could create some regulatory isuses, said GLJ analyst Gordon Johnson, who adds that Chinese regulators could also try to veto a merger.
Wall Street's commonly cited timeline for a potential merger is 12 to 18 months from the initial public offering, which puts the announcement in mid-2027 to early 2028. The deal could easily take a year to close pushing the final date for the creation of one Musk-run trillion-dollar company to 2029.
By then, Tesla plans to be selling robots with millions of robo-taxis on the road. SpaceX plans to be lauching AI-computing statellites on its huge Starship rocket. Investors shouldn't forget about how each company will make those things happen while focusing on merger hype.
The potential deal is hard to ignore, though, and speculation isn't going to stop.
Comments