The Zhitong Finance App learned that Elon Musk's outlook for SpaceX (SPCX.US) is causing Wall Street to begin evaluating a giant company that may be unprecedented in scale. If we add a possible partnership between SpaceX and Musk's electric vehicle giant Tesla (TSLA.US), investors may face a “Big Mac” level deal.
Musk expects SpaceX's annual recurring revenue (ARR) to reach “some level between $500 billion and $1 trillion” by the end of 2027. Its booming artificial intelligence (AI) computing power business is driving market bets, and SpaceX may become the fifth hyperscaler (hyperscaler) after Meta (META.US), Alphabet (GOOGL.US), Microsoft (MSFT.US), and Amazon (AMZN.US).
Daniel Newman, CEO of Futurum Group, said in an interview: “Considering that SpaceX has a growing satellite business and also has a lucrative space business, and the profits generated by the AI business can continue to provide financial support for it, they may now merge with Tesla. This not only means that it will become the fifth hyperscale cloud service provider, but also a global supercompany.”
Wall Street strategists have begun to look at SpaceX and Tesla as a whole. As Musk continues to expand fields such as artificial intelligence (AI), robotics, advanced manufacturing, satellite communications, and computing infrastructure — including data centers on Earth and data centers that may be deployed in orbit in the future — the business boundaries between the two companies have gradually blurred.
In response to questions from analysts during the SpaceX third quarter earnings conference call, Musk said that both SpaceX and Tesla have set up special committees to discuss the merger. He also said that the merger of the two companies was a good idea.
Wall Street is increasingly betting that this will be the largest merger in history. Dan Ives of Yorkville Ives, a well-known tech analyst, said: “We believe the probability that Tesla and SpaceX will merge by the end of 2027 is 80% to 90% due to a range of strategic AI and data drivers, and this is the right step for Musk.”
If a deal is reached with Tesla, SpaceX will participate in the electric vehicle manufacturer's launch of the Optimus humanoid robot, the development of the Cybercab business, and ultimately the Terafab program (Terafab is Musk's ambitious chip manufacturing plan aimed at reducing production costs by up to 90%).
Tom Narayan, chief stock analyst at RBC Capital Markets, said, “This (Terafab Plan) is their way around Nvidia and TSMC. If they can do that, it would be a huge breakthrough.” These chips will be used in everything from data centers to hundreds of thousands of humanoid robots, while Tesla plans to produce 20,000 Optimus units per week by the end of 2027.
Canaccord Genuity Capital Markets analyst George Gianarikas raised Tesla's target price from $410 to $442 after Tesla announced quarterly results, and the core logic of this target price was the merger of the two companies. George Gianarikas said, “If the two companies merge, then you're buying the future of the physical world. It's a company trying to build Tomorrowland (the future world), and it's not just about programming. You're buying a Berkshire Hathaway belonging to the field of future physical technology.”
Meanwhile, J.P. Morgan analyst Doug Anmuth more than doubled the company's price target to $500 after SpaceX reported better-than-expected quarterly results last week. SpaceX's business has far surpassed rockets and satellites; the company plans to become a leading mobile communications operator and build data centers in space. Doug Anmuth said, “SpaceX's ambitions are bigger than any company we've ever seen — to enable humans to survive on multiple planets, use solar energy to expand AI in space, and build bases on the moon and cities on other planets.” “No other company can be as well-prepared as SpaceX for an estimated total potential market (TAM) totaling more than $28 trillion.”