Morgan Stanley said Tesla and SpaceX were more likely to pursue the market for artificial intelligence in the physical world together than apart, in a note published Monday that set out 11 areas linking the two Elon Musk-led companies.
The two companies “share tech, talent, and infrastructure in a shared mission of converting energy to intelligence,” analysts led by Adam Jonas wrote.
The note arrived a week after Musk, asked at the All-In Summit in Los Angeles why Tesla and SpaceX remained separate, called it a “great question” and said “with all this collaboration, on so many levels, who can imagine what action one might take when there’s so much close collaboration in so many areas.“
It stops short of calling for a merger. It gives no valuation, exchange ratio or structure for a combination.
As of publication time, both companies were trading higher. Tesla shares were jumping 2.84% at $374.61 while SpaceX shares were rising 2.20% at $156.05.
The Argument
Jonas’s team argued that as large language models approach potential performance limits, investor attention will turn to markets that remain underpenetrated, such as robots and autonomous vehicles operating in the physical world.
Neither company adds much to the “pure LLM frontier model market,” they wrote, but that “reveals a wide open lane in physical AI that these two companies may be uniquely capable of addressing, separately or, more likely, jointly.”
“In our view, it is the belief of Elon Musk & team that the next decade of AI value creation will be decided by who can build, power, connect, and instrument AI in the physical world,” the analysts wrote.
They listed the areas linking the companies as chips and AI hardware, energy storage, vehicles and components, agentic platform development, solar, materials engineering, vendors, connectivity, cross-ownership, culture and talent.
In their framing, SpaceX gives Tesla compute, connectivity and capital. Tesla gives SpaceX robots, data, energy and manufacturing.
What the Note Counts
Morgan Stanley counted 71 distinct mentions of Tesla in SpaceX’s S-1 registration statement. It said 34% referred to direct collaboration between the companies and 41% to governance matters and related-party transactions.
According to figures cited in the note, SpaceX and xAI, which became a SpaceX subsidiary in February, bought $506 million of Megapack energy storage and $131 million of Cybertrucks from Tesla in 2025.
The analysts pointed to Terafab, the chip plant the two companies are building in Texas with Intel, whose total construction cost has reportedly been estimated at more than $119 billion.
The companies put the committed first phase at about $16.8 billion in August.
They also cited Macrohard, which the note described as an AI agent platform the companies are developing together, and a shared target of 100 gigawatts a year of vertically integrated solar manufacturing capacity in the US.
On compute, the note projects SpaceX’s capacity reaching 4.9 gigawatts by the end of 2027 and 15.3 gigawatts of terrestrial capacity by 2031. Tesla is integrating Starlink connectivity into its vehicles, starting with the Cybercab.
The note quoted SpaceX Chief Financial Officer Bret Johnsen: “Connectivity to a humanoid robot or an autonomous car or other any type of flying vehicle is not something that you’re going to do with terrestrial solutions.”
Tesla’s contribution, in their account, is robots that can act as data-collecting nodes and distributed compute, battery storage, and a manufacturing base of more than 135,000 employees, which the analysts put at over six times SpaceX’s workforce.
The note also cited Gwynne Shotwell, SpaceX’s President and Chief Operating Officer, speaking before the June listing: “There’s no question that there’s synergies between Tesla and SpaceX in our futures, definitely, there’s a convergence of a kind of what we’re all trying to accomplish in the future.”
Two Analysts, Two Stocks
The note comes from Morgan Stanley’s SpaceX analyst, not its Tesla analyst.
Jonas covered Tesla for years as one of its best-known bulls before moving last year to cover AI and humanoid robots.
He initiated coverage of SpaceX on July 7 at Overweight with a $300 target, the highest among the big banks, in a note that described the company as able to convert energy into intelligence at scale.
That initiation listed potential conflicts with Tesla-related ventures among its risks. He reiterated the rating on September 15.
Tesla is covered by Andrew Percoco, who rates it Equal Weight with a $400 base-case target. His most recent note, on September 11, raised the bull case to $840 on the potential of an autonomous Tesla Semi without changing the base case.
Morgan Stanley and Goldman Sachs were the lead underwriters of SpaceX’s initial public offering in June.
The Merger Question
Musk has been asked directly about combining the companies twice in two months, on Tesla’s second-quarter earnings call on July 22 and at the All-In Summit on September 14.
Both times he pointed to the overlap between them without committing.
Tesla holds about 19 million SpaceX shares, a stake of less than 1% that stems from its $2 billion investment in xAI in January, before SpaceX acquired xAI in February.
Tesla booked a $1.01 billion unrealised gain on the stake in the second quarter, more than twice its $398 million of operating income.
Any stock-swap combination would need the approval of Tesla shareholders. Musk controls most of SpaceX’s voting power.
