SpaceX Is Going Public. Why a Tesla Merger Could Be Musk’s Real Endgame.
From the biggest IPO on record to the largest M&A deal in history?
SpaceX’s initial public offering may be the largest IPO ever, but it might just be a prelude to the largest merger ever—a combination of Tesla with Elon Musk’s space venture.
On April 1, SpaceX reportedly filed confidentially for an IPO. It’s likely to raise $75 billion, more than double the $29 billion Saudi Aramco raised in 2019, and three times the $25 billion Alibaba Group Holding raised in 2014. Its valuation could come in close to $2 trillion, immediately making the company the sixth-most valuable in the U.S. Not bad for a venture that was worth only $350 billion a year ago and was founded by a 30-year-old who thought it was dumb to dispose of rockets as if they were plastic straws.
SpaceX’s IPO would be remarkable on its own, but it might only be the first step in a process Musk calls “convergence,” the act of combining all his companies into one. That process is well under way. Just two months ago, SpaceX merged with Musk’s xAI in a deal that valued the X parent at $250 billion. A combination of Tesla and SpaceX, to create a $3.5 trillion behemoth, would yield an AI-infused industrial megaconglomerate that would instantly become one of the most valuable companies in the world—and the premier manufacturing company on the planet.
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“I think it’s probable,” says Baird analyst Ben Kallo. “It looks like that’s going to happen.”
No matter what happens, the SpaceX IPO is coming first, and it’s the better business. Yes, it could help rescue Tesla—whose shares have fallen almost 30% after hitting a record high in December —from its current stagnation. But for now, investors may be better off focusing on SpaceX and holding off on buying both stocks.
SpaceX is already staggeringly successful—and has a knack for making others in the industry look a little foolish. It took only six years from its founding in 2002 for SpaceX to become the first privately funded organization to put a liquid-fueled rocket into orbit. Few understood exactly what was happening. In 2015, SpaceX President Gwynne Shotwell was chided in Congress about how her company could afford to offer launches at a price far below the $400 million of America’s dominant commercial launch provider, ULA, a 50/50 joint venture between Boeing and Lockheed Martin.
“It is hard for me to say,” she replied. “I don’t know how to build a $400 million rocket.” By 2017, SpaceX was reusing rockets, dramatically lowering the cost to reach orbit.
More recently, SpaceX posted a picture of its improved Raptor rocket engines, leading Tory Bruno, at the time the head of ULA, to comment that there was “no need to exaggerate” SpaceX’s tech by showing “partially assembled” engines. SpaceX responded by posting a video of the engine running. “Works pretty good for a ‘partially assembled’ engine,” said Shotwell. The tech, which integrated cooling and sensors inside components, appeared almost magical—even to industry insiders.
Investors have to put a multiple on that magic when SpaceX goes public. Currently worth $1.25 trillion after the xAI merger, SpaceX will be aiming for a valuation of up to $2 trillion, or roughly 75 times estimated 2026 sales and 160 times estimated earnings before interest, taxes, depreciation, and amortization, or Ebitda.
It’s an eye-popping valuation, and not one that lends itself to comparison—not even to Tesla, which trades for closer to 100 times estimated Ebitda. But SpaceX is unique. It handles more than half of the world’s orbital launches, helped by its massive cost advantage from reusable rockets. It also built Starlink, a profitable space-based broadband product, which had more than nine million subscribers at the end of 2025, up roughly 100% year over year, each paying at least $600 a year for the service. SpaceX is “a cash machine,” says Rainmaker Securities managing director Greg Martin, who believes SpaceX’s Ebitda profit margins were as high as 50% before the xAI merger.
For SpaceX’s valuation to make any kind of sense, the company will have to keep those margins high as it grows—and that means making it even cheaper to go to space. SpaceX’s partially reusable Falcon 9 costs an estimated $2,000 to $3,000 per kilogram to reach low Earth orbit, 1/20th the cost relative to the Space Shuttle. SpaceX’s huge, fully reusable Starship could cut costs relative to Falcon by another 80% to 90%.
Musk’s big bet with SpaceX is on space-based data centers, which he believes could be cheaper to operate than terrestrial ones in two to three years, even if they’re more expensive to build. Musk spent an estimated $3 billion to $4 billion on xAI’s Colossus I data center, equipped with 100,000 Nvidia
H100 GPUs, in Memphis. Right now, SpaceX might require 1,000 satellites in 100 launches to put that number in space, which could cost double that amount. With Starship, however, the number of flights to build the equivalent data center gets cut by 75%, and the total cost might be only 20% higher.
The savings from running the space-based data centers would be enormous. SpaceX wouldn’t have a $200 million annual power bill to run Colossus, as xAI does, and there would be no Memphis residents complaining about the hum or impact on water prices. With additional satellite, chip, rocket, and cooling work, plus rising costs for terrestrial power and construction, it isn’t hard to imagine a world where it’s more cost-effective to build in space.
And it would be big business, if successful. OpenAI is spending $60 billion a year, with Oracle, for 4.5 gigawatts of compute capacity. Musk wants to put 100 gigawatts into space. That’s $1.3 trillion in annual compute sales, based on Oracle’s metrics. For SpaceX, success could mean the difference between an astronomical valuation and something far lower.
“If orbital data centers aren’t a thing…that’s definitely a [valuation] drag,” says Martin. “If they are a thing, it’s a $10 trillion company.”
SpaceX isn’t alone in dreaming about a sci-fi future. In November, Alphabet unveiled Project Suncatcher, which aims to put AI compute into space in 2027. In March, Nvidia unveiled its Space-1 Vera Rubin Module, chips optimized for space-based computing.
As with everything Musk, the SpaceX IPO isn’t without controversy. While combining SpaceX’s infrastructure with xAI’s artificial intelligence might make sense on paper, it creates risks that the company didn’t need to take. Competition in the AI space is brutal, and xAI doesn’t make money. It also faces lawsuits over nonconsensual sexual imagery generated by Grok, among other privacy issues. Yet despite those risks, xAI was valued at $250 billion at the time of the merger, less than the $852 billion for OpenAI and the $380 billion for Anthropic, but not bad for a venture burning an estimated $1 billion a month by the end of 2025.
Tesla might be the bigger issue. The electric-vehicle maker’s stock is trading at its lowest level since September, yet still fetches 190 times estimated 2026 earnings, which have been falling. Many don’t even consider it a car company anymore, despite its main businesses being energy storage and electric vehicles. Instead, its valuation is largely a reflection of physical AI—robo-taxis and robots and other manifestations of the real with artificial intelligence.
Cars pay the bills, but AI creates the value, which has created an odd situation on Wall Street. RBC values the robo-taxi business and self-driving businesses at about $840 billion, while Morgan Stanley puts Tesla’s autonomous-driving technology at closer to $1.2 trillion and robots at $270 billion. Deutsche Bank values Tesla’s robots at closer to $400 billion. While those estimates are all over the place—and don’t include cars or power—they’re a sign that Wall Street’s bulls believe Tesla is on the cusp of unlocking a new era of earnings growth by merging AI with machines.
When that new era arrives is anyone’s guess. In January 2026, Musk promised that Tesla robo-taxis would be in nine cities in the first half of 2026; they are in just one— Austin, Texas. Musk also said the third generation of Tesla’s humanoid robot, Optimus, would be revealed in the first quarter, but missed that deadline too, raising concerns that China’s robot rivals may have an insurmountable lead in the technology.
That’s typical Musk. J.P. Morgan analyst Ryan Brinkman points out that Tesla delivered just 360,000 cars during the first three months of 2026, well short of the 1.4 million Wall Street predicted back in 2022. The lack of EV growth and AI delays are among the reasons Tesla stock is down 20% this year. But even those losses might not reflect the possible downside.
“Incredibly, Tesla shares are [more than] 50% higher now than when delivery volumes peaked in June 2022,” writes Brinkman, who has an Underweight rating and $145 price target on the stock, down 58% from a recent $347.
A merger of SpaceX and Tesla could solve Tesla’s growth problems. The links between the two companies have been accelerating since the start of 2025. It began when Musk merged X with xAI in March of that year, and then integrated the xAI chatbot Grok into Tesla vehicles in July. In January, Tesla announced a $2 billion investment in xAI, resulting in Tesla owning a small stake in SpaceX following the completion of that merger in February.
Last month, Musk announced Macrohard —a joint SpaceX-Tesla project to create an Amazon Web Service-like business using the computing capacity that lies inside Tesla vehicles. xAI will create a digital assistant, like many other agents, to make work more efficient, with the software running on idle Tesla vehicles. It’s a cost-effective way to boost AI computing power, potentially generating new revenue for both companies. AWS generated $129 billion in 2025 sales, up 20%, and almost $46 billion in 2025 operating profit, nearly 60% of Amazon.com’s total operating profit. xAI, SpaceX, and Tesla are also working to create a “Terafab” semiconductor manufacturing operation, which Musk called “the most epic chip-building exercise in history.”
The logic seems obvious: “He’s trying to tie the two companies closer together so that he can, in the very near future, combine SpaceX and Tesla,” says ARK Investment Management’s Nick Grous, though the firm notes that such a process will likely take time.
For Future Fund co-founder Gary Black, the math doesn’t add up. SpaceX is likely to trade at 160 times estimated 2026 Ebitda, a roughly 60% premium to Tesla’s lofty valuation. At recent levels, that means Tesla investors would contribute roughly 55% of the earnings and get only 40% of the stock in a combined company. “It’ll never happen,” says Black. “Why would Tesla shareholders dilute themselves?”
Tesla’s shareholder base isn’t like others—and SpaceX’s won’t be, either. Musk is thinking about shareholder ties, potentially allocating 30% of the IPO to retail shareholders. That’s higher than normal, but Musk knows the power of his retail shareholder base, who hold about 50% of Tesla’s shares available for trading, about twice the ratio for other large tech companies. Those shareholders have consistently aligned with Musk on issues of strategy and pay. What’s more, a Tesla-SpaceX combo could be worth $3.5 trillion-plus, more than Microsoft and Amazon.
Investors who want to bet on convergence could start with a small position in SpaceX once it goes public, and wait to see how things develop. But there are other ways to play the trends that a SpaceX-Tesla merger represents. A Musk conglomerate has elements of AI chip production and design, like Nvidia and Taiwan Semiconductor Manufacturing. China’s BYD makes EVs like Tesla, and Hyundai Motor, the owner of Boston Dynamics, will compete with Tesla on robotics. Rocket Lab builds and launches satellites into space, while AST SpaceMobile is a Starlink competitor. Brookfield Renewable provides power, like Tesla’s energy storage business. Alphabet is developing foundational AI technology, competing with xAI.
A conglomerate made up of those companies would generate $600 billion in combined 2026 Ebitda, and trade for about 23 times estimated 2026 earnings.
That’s cheap, but what none of those companies have is Musk, an undeniably controversial figure for a host of reasons, including his political leanings, his unapologetic personality, and the sheer size of his wealth. He is also the pre-eminent builder in America, making data centers, solar panels, batteries, satellites, rockets, robots, and electric cars. It’s a manufacturing empire that attracts top talent, and has made getting an engineering job at SpaceX or Tesla harder than getting into Harvard.
Regardless of whether the convergence happens—or whether the combined Tesla-SpaceX succeeds—Musk is already doing more than just about anyone to reindustrialize America. “[He] is getting people excited about building stuff again, as opposed to sitting in a cubicle or working on the financialization of existing things,” says Sam Klar, portfolio manager of the GMO Domestic Resilience exchange-traded fund. Klar is a value investor, which means he isn’t likely to participate in the SpaceX IPO, but he’s happy that Musk is re-energizing the American manufacturing ethos.
It’s the most ambitious IPO and merger ever. If Musk builds it, will investors come?
