Sure, let’s smoosh SpaceX and Tesla together, who cares

The flat to which you discover this merger compelling apt has to do alongside the flat to which you accept Elon Musk concerning wanting to go to Mars, or “spread the ray of consciousness,” as he put it in this week’s SpaceX earnings call (and before S-1). Now, a fairly informed individual knows that we don’t have the innovation — or, frankly, equal the raw data to build the innovation — in command to assistance individual existence in space. So that method robots. But a lag between Earth and the Moon or Mars makes for difficulty in controlling the robots. So having artificially intelligent robots who can create decisions on their own alongside minimal supervision from Earth is the next sci-fi logic step.

If you accept Musk’s story, the innovation we are talking concerning is being developed through self-driving cars (Tesla), LLMs (SpaceX), and humanoid robots (Tesla), all of which necessitate data centers (SpaceX). Conveniently, we have fair had earnings for the two companies. On the another hand, if you perspective Mars as a helpful fabrication Musk uses to explain his antics in public, well, there’s a lot of prosperity and a lot of authority Musk gets from the merger.

Musk stated on the latest SpaceX earnings call that “there’s a lot of deserve to combining” SpaceX and Tesla. Why? “There’s a lot to be gained from cooperating on evolving superintelligence software.” But synthetic intellect — ah, excuse me, super intellect application isn’t the endeavor SpaceX is really in correct now. In its Q3 earnings on Tuesday, SpaceX reported $7.56 milliard in income from the synthetic intellect — sorry, sorry, super intellect division. The subcategory “SI solutions & infrastructure revenues” — which I think is Grok, Cursor, and the neocloud endeavor wrapped together — jumped to $7 billion, or additional than three times what it was final quarter. Now several of this was getting Cursor stapled on, which added $608 myriad in revenue. Most of the remainder of that $7 milliard was apt renting out compute to Anthropic and Google; Grok is likely contributing less, says Gil Luria, an expert at DA Davidson.

At archetypal blush, this may appearance comparable to the income of a business akin Anthropic, whose leaked S-1 shows the business had $16.3 milliard in income in the archetypal fractional of this twelvemonth from its frontier models. But SpaceX’s AI endeavor looks additional akin CoreWeave than Anthropic. While we are told in the media publish there was “increased Grok acceptance throughout endeavor customers and consumers,” that figure wasn’t damaged out from bare-metal revenue. And if Musk wanted to brag concerning it, he would.

As for Tesla, which released Q3 results on Wednesday, its earnings sucked — a second successive fourth of declining profits. That’s since Musk is apparently not particularly curious in normal cars anymore. Instead, Tesla is focusing on robots and, I guess, self-driving taxis. (There was additionally a Roadster hopping car demo recently, but that’s not going into manufacturing for a brace years, it’s extremely expensive, and Tesla cannot justify it volition be delivered.) Musk did not detailed on his comments concerning the merger on the Tesla call.

SpaceX and Tesla have several tie-ups already; SpaceX, for instance, bought $131 million of the low-selling Cybertrucks from Tesla. It has, in the past, held Tesla bonds. More crucially, the companies have additionally announced two AI — fuck it, we’re fair sticking alongside AI — projects together: Terafab and Macrohard.

Terafab is the chip-making project that Musk intends to build in Texas and run to provision himself alongside chips; Intel is partnered, kinda, alongside Musk to create the technology. Macrohard is, uh, an AI project that lets group simulate application already made by Microsoft. At least, I think that’s what it’s expected to be. Typing the name of the second makes me adore for the asteroid to hit us all correct now, so perchance it’s fortunate that we haven’t heard much concerning it since the notice in March.

SpaceX’s S-1 from May stated that Terafab and Microhard “are in the extremely first stages, hence of which we and Tesla have not finalized a assortment of particulars relating to our collaboration, including, but not constricted to, financial terms, intelligent asset rights, and the supreme term of our collaboration.” As of before this month, Intel’s CEO stated the business remained committed to the partnership, but it’s not obligated to remain part of Terafab and the S-1 says there may never be a conclusive agreement. Intel’s Thomas Hannaford didn’t immediately react to my emails asking if item had been signed in the interim.

On this week’s call alongside SpaceX investors, Musk claimed the Terafab volition attain quantity manufacturing in the second fractional of 2028. He additionally stated the business volition have its archetypal test part from the facility in May or June 2027. “Musk has a former of environment timelines that his ​companies have missed,” Reuters notes, alongside a flat of what I can lone depict as wry understatement. When an expert on the call asked if Musk had placed orders for machines needed to create cutting-edge equipment, Musk did not answer.

Companies frequently are doing additional privately than they province publicly, so I do not perspective the S-1 filing as completely definitive. But Macrohard isn’t mentioned in the final 10Q. Neither is Terafab.

Musk is going to lb the array concerning the Moon, Mars, “and beyond,” and a important chunk of his fan basis is extremely into this. But there are perchance several boring financial reasons shareholders may have an interest.

Let’s say you are constitutionally extremely distinct from me, and much richer, and for this logic you own a figure of shares in Tesla. You’re a big believer in Elon Musk — evidently — but you notice that the man has an notice extend of a squirrel on cocaine. He’s on X basically continually and frequently racistly. He keeps showing up at the White House to do material that pisses off would-be Tesla customers. Then he publically feuds alongside the president. Sometimes he’s extremely enthusiastic concerning rockets, and sometimes he’s extremely enthusiastic concerning Dogecoin and sometimes he’s really into Grok and sometimes he thinks concerning cars. But you notice that one way or the another he’s been thinking concerning cars a lot small lately.

Since he seems to be focused — insofar as he can be stated to concentration — on AI, you notice several beautiful big conflicts of interest. Musk’s companies “all need the identical scarce Nvidia chips to power their AI, for instance,” notes Matt Levine, a longtime Musk observer. But if you merge the companies, well, perchance you build the finest general-purpose AI. And then? “If you build the finest general-purpose AI model, perchance it can run the cars and run the robots and upload people’s brains and assist right-wing takes on Twitter.”

Also, there’s a enormous AI infrastructure buildout happening, and so basically all you have to do is say “Nvidia” and person volition provision you a fuckton of money. The merger puts all the AI projects in one pile, affirmative additionally several cars and rockets and satellites I guess. “‘Give us $100 milliard to build data centers in space, but if for several logic we don’t build data centers in area you can repossess our car factories and data centers on earth’ is a fine throw to credit investors,” Levine writes.

Musk additionally has a former — not continually successful — of construction bodily infrastructure. This is, at smallest from my item of view, a improved bet whenever it comes to construction data centers than some Bitcoin miners who pivoted. “If Elon builds at the charge he talked about, he volition have many of additional capability and be capable to market much of it,” says Luria.

From this item of view, obviously SpaceX and Tesla should merge, Levine writes:

It’s not exactly that simple, of course. The particulars of the agreement matter; a lot of group are assuming a stock-for-stock merger. (“I assume the acquirer would be SpaceX, in part since it has a bigger market capitalization but mostly since of Musk’s greater authority there,” Levine writes.) So does the regulatory environment. The case that SpaceX and Tesla should merge because of AI is additionally benevolent of an antitrust logic they shouldn’t?

The current regulatory surroundings is, in ample part because of Musk’s meddling via his DOGE cronies, let’s say lax. Donald Trump, the current president, has two additional years remaining in his term. Also, the markets have started getting waves of nervousness about AI. Earlier this summer, there was the Situational Awareness thing, and afterward there was the additional latest CoreWeave thing, and, well, capitalist opinion may be changing. That method “there’s a shove to province a agreement by the archetypal fractional of 2027 so that it closes during this administration,” Bloomberg writes, attributing this to “people who are acquainted alongside the matter.”

Musk has additional authority at SpaceX than he does at Tesla. His voting power is complete 50 percent, since he owns particular supervoting shares. He is the CEO, CTO, and chairman of the board. Shareholders are extremely constricted in how they can legally difficulty that power. The filing puts it this way: “This volition bounds or preclude your capability to power company matters and the ballot of our directors.”

At Tesla, however, Musk lone has concerning 20 percent of the vote. (“Only!”) So in a stock-for-stock merger, anywhere SpaceX is the acquirer, Musk abruptly has voting authority of the entire enchilada. “He gets voting authority of Tesla in the lone way he can,” says Ann Lipton, a prof at the University of Colorado Boulder’s law school. “He can’t alter it to a dual-class being now that it’s publically traded. This is the lone way to do it.”

Both companies are based in Texas, which makes it extremely difficult for shareholders to sue, says Lipton. “The chances of a shareholder being capable to sue on the Tesla or SpaceX flank are vanishingly small since Texas has erected so many barriers to shareholder litigation.” So there’s that hazard gone.

Leave apart the additional complex issues of national safety (for SpaceX) and antitrust. At a national level, securities laws are mostly “Did you disclose it?” notes Lipton. So the SEC, or what remains of it, volition desire to see that everything is disclosed to shareholders before the vote. As lengthy as the disclosures are accurate, that’s that. At the province level, there may be several issues — it’s a breach of fiduciary duty to create an unfair transaction hence of conflicts of involvement — but Shari Redstone did merge Paramount and CBS, so it’s not impossible.

What does Musk get from this merger? Well, control, a item he historically loves most of all. Potentially also, the blend adds $110 milliard to his net worth, according to Bloomberg. More interesting, however, is how the merger interacts alongside Musk’s enormous Tesla compensation package. If there’s a lawful alter of authority — for instance, since SpaceX buys Tesla — the operational milestones in Musk’s enormous pay bundle autumn away.

What matters afterward is Tesla’s valuation. If SpaceX pays $2 trillion or more, Musk gets a payout. At $2 trillion, Musk gets $6 milliard of shares. He additionally gets accelerated vesting of shares from his 2018 pay bundle — which would alternatively have vested in 2028. The alter of authority additionally method he can market them sooner.

Is that fine for SpaceX? Assuming we breeze up at or about the $2 trillion figure, we’re looking at basically a merger of equals — which method current SpaceX shareholders get diluted all to hell. Worse, Tesla’s endeavor is stagnating, and its AI ambitions are expensive. “It’s apt that SpaceX and Tesla blended volition expend near to a staggering $50 milliard on capex in Q4, and their businesses won’t arrive near to covering that number,” writes Shawn Tully in Fortune.

So on a numbers basis, I benevolent of think no, not really, not that fine for SpaceX. But none of Musk’s businesses are concerning numbers in the end — they are, to several extent, concerning how much you accept in Elon Musk. That’s what the Tesla evaluation versus regular automakers was concerning in the archetypal place. So sure, fine, slap them together and see what happens. The group who are purchasing what Musk’s selling, at this point, certainly cognize what they signed up for.