Musk backs SpaceX-Tesla merger as rocket firm turns profit
In the first official confirmation that the companies were formally talking, Musk said special committees of independent directors at both SpaceX and Tesla have been set up to study the idea at the request of shareholders.
· CNA · JoinRead a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST Tap here to return to FAST
FAST
WASHINGTON: Elon Musk said on Tuesday (Oct 20) that he would back a merger of SpaceX and Tesla, sending shares of the space and technology company up 8 per cent in extended trading.
Asked about a possible tie-up on a call with analysts, Musk said he felt he was "tap dancing through a minefield", but that a combination would be "a good idea".
The company earlier posted its first profit as a public company and Musk said he expected annual recurring revenue of between US$500 billion and US$1 trillion by the end of 2027, as demand for its data-centre space surges thanks to the AI boom.
Musk has in the past tantalised shareholders with the idea of combining SpaceX and Tesla, citing growing overlap between them. Speculation about the space company buying the EV maker has gained traction recently, with Barclays suggesting last week that a deal could be announced before Tesla's annual meeting in December.
CNA Games
Guess Word
Crack the word, one row at a time
Buzzword
Create words using the given letters
Mini Sudoku
Tiny puzzle, mighty brain teaser
Mini Crossword
Small grid, big challenge
Word Search
Spot as many words as you can
Show More
Show Less
In the first official confirmation that the companies were formally talking, Musk said special committees of independent directors at both SpaceX and Tesla have been set up to study the idea at the request of shareholders.
He added that he could not take part in their talks because he has a conflict of interest.
Musk is chief executive of both companies, and also serves as chairman and chief technology officer of SpaceX.
The world's richest person, Musk owns nearly a fifth of Tesla and just under half of SpaceX, and analysts have said a merger would give him control of the combined entity.
The committees have not agreed on the terms of any deal and there is no guarantee they will, Musk said, cautioning that it would be overstating it to treat a merger as a certainty.
Any deal would need the backing of a majority of all Tesla shares, not just those cast in a vote, which Musk called "quite a high hurdle".
The talks started in recent weeks and could result in SpaceX acquiring Tesla, a person familiar with the matter told Reuters, who declined to be named because they were not authorised to talk to media. Tesla has been working with an investment bank to advise on the discussions, the person said.
"I do think there's a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there's a lot to be gained from cooperating on developing superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starmind constellation, connectivity," he said.
Terafab, the chip manufacturing joint venture between the two companies, should produce its first test chip around May or June of next year and aims to reach volume production by the third quarter of 2028, Musk said on the call.
AI REVENUE DRIVES SPACEX TRANSFORMATION
Musk's remarks came after SpaceX posted net income of US$4.4 billion for the July-September period, compared with a loss of US$1.1 billion a year earlier.
Revenue jumped 161 per cent to US$14.6 billion.
AI revenue surged by almost 10 times to US$7.56 billion, mostly from renting out data-centre capacity to developers such as Anthropic, Alphabet's Google and Reflection AI rather than from its own models.
The third quarter offered the clearest evidence yet that SpaceX’s heavy investment in AI is translating into revenue, even as spending on compute infrastructure remains enormous - capital expenses nearly tripled to US$19.6 billion.
The shift is reshaping a company whose financial engine has long been its Starlink internet services business and whose longer-term ambitions still hinge on getting Starship rockets into regular service. For now, though, its main business looks closer to a cloud provider's than an AI lab's.
SpaceX's chief financial officer, Bret Johnsen, said the company expects US$35 billion to US$40 billion in capital expenditure in the fourth quarter.
"SpaceX delivered the quarter the bulls wanted, at least on the top line," said Will Rhind, CEO of asset manager GraniteShares. "The story now is all about AI. The compute contracts signed earlier this year are turning into revenue faster than a lot of people thought."
The company's AI business spans Grok, social media platform X and a fast-growing data-centre operation. The business also turned a profit in the third quarter, compared with a year-ago loss.
STARLINK SUBSCRIBERS TOP FORECASTS
The satellite-internet unit has continued to expand its subscriber base, aided by additional satellite launches and a growing range of consumer, enterprise, aviation, maritime and government services.
Starlink reached 13.6 million subscribers in the third quarter, above the 12.19 million analysts expected, but growth is coming at a price: average monthly revenue per subscriber has fallen from US$99 in 2023 to US$69 in the third quarter as it expands abroad with cheaper plans.
The company has said geographic expansion beyond the wealthiest countries could push average revenue per user lower over time.
Starship, SpaceX's next-generation reusable rocket system, has yet to enter commercial service. It is expected to enable deployment of higher-bandwidth Starlink satellites and orbital AI-computing infrastructure. The company's ability to turn Starship into a reliably reusable vehicle is central to its longer-term strategy.
The space segment includes commercial launches, government missions and Starship development and remains a significant source of costs and uncertainty.
Newsletter
Week in Review
Subscribe to our Chief Editor’s Week in Review
Our chief editor shares analysis and picks of the week's biggest news every Saturday.
Sign up for our newsletters
Get our pick of top stories and thought-provoking articles in your inbox
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app