Musk Wants to Merge SpaceX and Tesla Into a $3.5 Trillion Company — Here’s Why Not Everyone Is Buying It

TLDR

• SpaceX filed confidentially for an IPO expected to raise $75 billion at a valuation near $2 trillion
• Analysts and investors are debating a potential merger between SpaceX and Tesla
• Musk has called his strategy “convergence,” merging his companies into one entity
• Tesla stock is down over 20% this year, and JP Morgan warns it could fall another 60%
• A combined SpaceX-Tesla company could be worth over $3.5 trillion

Elon Musk’s SpaceX filed confidentially for an IPO on April 1, 2026. The offering is expected to raise $75 billion, more than double the $29 billion Saudi Aramco raised in its 2019 IPO. SpaceX could be valued at close to $2 trillion when it goes public, making it one of the most valuable companies in the US.

But the IPO may only be the beginning. Analysts and investors are now debating whether Musk plans to merge SpaceX with Tesla, creating a company worth over $3.5 trillion. That would make it the largest merger in history.

Musk has used the word “convergence” to describe his plan to bring his companies together. He has not publicly confirmed merger talks, but his actions have fueled the speculation.

In February 2026, SpaceX completed a merger with xAI, Musk’s AI company, valuing the combined entity at $1.25 trillion. Tesla then announced a $2 billion investment in xAI, giving it a small stake in SpaceX. Musk also announced a joint chip factory called Terafab and a shared AI agent project called Digital Optimus, linking Tesla and SpaceX operations more closely.

SpaceX’s Business Case

SpaceX handles more than half of the world’s orbital launches. Its Starlink satellite broadband service had over nine million subscribers at the end of 2025, up roughly 100% year over year, with each subscriber paying at least $600 annually.

Musk’s longer-term bet is on space-based data centers. He believes they could be cheaper to operate than land-based ones within two to three years. If successful, SpaceX could tap into a compute market currently worth over $60 billion a year, based on OpenAI’s current spending rate.

SpaceX’s reusable Falcon 9 rocket already costs an estimated $2,000 to $3,000 per kilogram to reach low Earth orbit. Its next-generation Starship rocket could cut those costs by another 80% to 90%.

Rainmaker Securities managing director Greg Martin estimates SpaceX’s Ebitda profit margins were as high as 50% before the xAI merger.

Tesla’s Challenges

Tesla stock has fallen over 22% since the start of 2026 and is trading near its lowest level since September 2025. JP Morgan analyst Ryan Brinkman has an Underweight rating on the stock with a $145 price target, roughly 58% below its recent price.

Tesla delivered 360,000 vehicles in the first quarter of 2026, well below Wall Street’s earlier forecasts. Musk had promised robo-taxis in nine cities in the first half of 2026, but they are currently operating in only one city, Austin, Texas.

Not everyone thinks a merger makes sense. Future Fund co-founder Gary Black argues Tesla shareholders would contribute around 55% of earnings but receive only about 40% of shares in a combined company. Columbia Law Professor Dorothy Lund notes a deal would require a shareholder vote and could face antitrust scrutiny.

SpaceX is aiming to go public by July 2026.

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