SpaceX and Tesla are on an inevitable collision course

If rocketmaker SpaceX indeed goes public in June, as seems to be its plan, Elon Musk could be conducting quarterly earnings calls for two companies. But how long until that reverts to one?

On Wednesday afternoon, the world's richest man hosted the first-quarter call for Tesla, his electric-vehicle maker. Sales of automobiles, which grew 16 per cent year on year, were hardly discussed. Instead, the company is focused on energy storage, robotaxis and Optimus, its "bi-pedal, autonomous humanoid robot capable of performing unsafe, repetitive or boring tasks".

If Tesla increasingly feels like a science project, all the more reason to think its natural home is under one roof with SpaceX, which last year merged with Musk's social network and AI company xAI. SpaceX is set to list at what could be a near-$2tn valuation. Already, Musk spreads his busy days and presumably sleepless nights across his various projects, so a Tesla-SpaceX combination might just codify reality.

The possibly sidelined electric-vehicle business still generates serious cash flow, even if sales have moderated from historic levels and factories are being retrofitted for robot production. Selling cars drove operating cash flow of $4bn and free cash flow of $1.4bn in the quarter, enough that the company decided to spend $2bn on SpaceX stock.

That, though, is peanuts compared with the $25bn in capital expenditure that Musk and his chief financial officer warned the company would spend in total this year on semiconductor production and robot factories. Analysts were expecting $20bn, according to LSEG. A year ago, they had been forecasting just $11bn for the whole of 2026. Nonetheless, the shares hardly moved on Wednesday in after-market trading.

Even that capital expenditure is, in turn, peanuts compared with the $60bn SpaceX said this week it had offered to pay for Cursor, an AI coding tool. Should Musk not proceed with that acquisition, he has proposed instead a $10bn termination fee. Further evidence that SpaceX too is a Musk-driven moonshot, albeit with a substantive satellite and rocket business attached.

True, a merger of Tesla and SpaceX would come with conflicts that require careful handling. As a test of their directors' gumption, the two companies are working together on a semiconductor plant in Texas called the Terafab, alongside Intel. Musk says the partnership will be reviewed by independent directors from both sides to make sure it is fair to all shareholders. Of course, the biggest of those in each case is Musk.

Non-Musk shareholders in Tesla have always given their hero a long leash. SpaceX shareholders will probably do the same, though since it is expected Musk will hold super-voting shares, what they want matters little. In valuation terms, neither company is tethered to near-term profits or cash flow. To the extent that shareholders really just want exposure to Musk, a single security seems like the sensible end state.