Wall Street Is Starting to Talk About Tesla's Endgame

Key Points

• Merger speculation between Tesla and SpaceX is building rapidly ahead of the latter’s IPO, which could be the largest in history.
• Much of the early groundwork has already been laid, with a joint Terafab chip fabrication facility under development and Tesla's prior xAI investment having already converted into SpaceX shares.
• With the stock up more than 30% over the past couple of weeks, the market appears to be leaning into a future that looks very different from Tesla's past.

Shares of Tesla Inc NASDAQ: TSLA have had a solid couple of weeks since hitting a multi-month low last month. The stock’s up more than 30% since early April and is currently trading around $440, putting it back in territory that not too long ago had felt out of reach.

The broader bull case around full self-driving (FSD), robotaxis, and Optimus has been well documented, and the company's most recent earnings report did little to dampen enthusiasm. However, a new and potentially more significant narrative is beginning to take shape, one that could redefine Tesla as a company.

The Rumors Are More Credible Than They Look

The past few weeks have seen rumors build concerning something truly explosive. Reports have emerged that Elon Musk has been discussing with colleagues the possibility of merging Tesla and SpaceX NASDAQ: SPCX, his spacecraft and satellite company. Yes, that SpaceX, the one that’s on track to go public sometime in the coming weeks, in what could be the largest IPO in history.

If that hasn’t been enough to get Musk’s fanbase excited, then perhaps the fact that a merger with Tesla would theoretically make the resulting company one of the most valuable ever assembled might do the trick.

Wedbush analyst Dan Ives, one of the most consistently bullish voices on Tesla, believes this is where things are heading. In a recent note to clients, he put the odds of a merger by early 2027 at 80-90%, arguing that the groundwork is already firmly in place. His view is that Musk wants to own and control more of the AI ecosystem, and that combining SpaceX and Tesla is the logical next step of a strategy he’s actually been executing for years.

Musk Has Done This Before

What gives the merger thesis genuine credibility isn't just the speculation; it's the pattern that comes before it. Not only has Musk demonstrated a tendency, if not an outright strategy, to move engineers between his companies, but he also has a well-established track record of quietly consolidating the companies he controls in the background.

For example, earlier this year, Tesla invested $2 billion in Musk’s xAI company, which had itself acquired X (formerly Twitter) last year when Musk bought it. Musk’s SpaceX company has since acquired xAI, meaning Tesla shareholders already have a substantial link to SpaceX sitting on their balance sheet, without a formal merger having even taken place.

That’s an intentional and well-thought-out chain of transactions. Each step has brought Tesla and SpaceX closer together operationally and financially, potentially quietly laying the foundations for something larger. Add in the joint Terafab semiconductor fabrication facility currently under development, which will manufacture chips for both companies, and the likelihood of the two organizations being deliberately stitched together becomes hard to ignore.

The Bull Case Is Exciting

For Tesla bulls, the appeal of a merger is straightforward. Quite aside from generating maximum investor hype with its pending IPO, SpaceX brings Starlink's satellite infrastructure, advanced AI capabilities through xAI, and a rocket business second to none. Combined with Tesla's established manufacturing scale, emerging energy storage technology, and robotics ambitions, the resulting entity would be a sight to behold; a vertically integrated AI and technology conglomerate spanning energy, transport, space, and computing.

Dan Ives has described it as the "holy grail" of Musk's empire-building dreams, and when you lay out the combined strengths on paper, it's not hard to see why he uses that language.

A Long Shot Worth Watching

The risks, however, are real, and there are plenty of voices already crying wolf about SpaceX’s supposed $1.7 trillion valuation. It’s not hard to think that Musk will have enough on his plate just making that a success.

Prediction markets, which have become increasingly recognized for their forecasting accuracy, are also considerably less bullish than Ives, with the current odds of a merger before May 2027 only around 33%. The valuation question is also significant, as both companies are trading at stretched multiples and a merger between them introduces meaningful execution risk. That’s if a deal could even make it to completion, given the kind of legal scrutiny it would attract, not to mention inevitable shareholder battles.

All that said, it makes for exciting reading, and if there’s one man who could pull it off, it’s Musk. For investors who believe in his long-term vision and track record of eventually delivering on ideas that initially seemed implausible, the direction of travel here is hard to dismiss.