Wedbush Securities, one of Tesla‘s most bullish backers on Wall Street, reaffirmed its view that the carmaker will merge with Elon Musk’s SpaceX in 2027, tying the call to the rocket company’s imminent stock-market debut.
“We continue to believe that SpaceX and Tesla will eventually merge,” the firm’s analyst team, led by Daniel Ives, wrote in a note on Wednesday, putting the probability at more than 80% and the timing in 2027.
The firm said the groundwork for combining the two operations is already in place.
The note escalates a thesis the firm has built for months, and lands as SpaceX prepares for what could be the largest initial public offering in history.
The IPO as Catalyst
SpaceX filed for its listing last month and is expected to begin trading on the Nasdaq over the next few weeks, targeting a valuation of up to $1.75 trillion.
A public listing would, for the first time, give SpaceX a traded stock that could be used as currency in a share-for-share deal with Tesla.
Ives framed the offering as a turning point, writing on X last weekend that the IPO “opens up a key chapter for investors in the 4th Industrial Revolution.”
He added that the listing signified a new investing landscape in space, beyond its significance for Musk and SpaceX alone.
A combined company would span electric vehicles, robotaxis, humanoid robots, rockets, satellites and artificial intelligence.
Based on SpaceX’s IPO target and Tesla‘s current market value, analysts have estimated the combined entity could be worth roughly $3.4 trillion.
The Connective Tissue
Wedbush pointed to two existing links between the companies as evidence that a merger is becoming more feasible.
The first is ownership: Tesla already holds a stake in SpaceX, after its $2 billion investment in xAI was converted into SpaceX shares when SpaceX acquired the AI company earlier this year.
The firm said that deal initially tied both of Musk’s ventures closer together.
The second is Terafab, a chip-manufacturing project the companies are building together.
The joint Terafab chip facility, the analysts wrote, “further ties both operations together,” and represents a first step toward merging them.
Ives has described the project as the connective tissue between Musk’s companies rather than a standalone Tesla effort.
“Musk wants to own and control more of the AI ecosystem,” he wrote, describing a combination of the two as a potential “holy grail.”
What Terafab Is
Musk unveiled Terafab earlier this year at Austin’s defunct Seaholm Power Plant, with Texas Governor Greg Abbott in attendance.
The project is a joint venture between Tesla, SpaceX and xAI, the AI company SpaceX absorbed in an all-stock deal in February.
The facility would bring chip design, lithography, fabrication, memory production, packaging and testing under one roof, a degree of vertical integration no chipmaker has attempted at that scale.
At full capacity, Tesla has said output would match roughly 70% of TSMC’s current global production, scaling from 100,000 wafer starts a month to one million.
Musk said the plant would produce 100 billion to 200 billion custom chips a year on 2-nanometer process technology.
Two chip families are planned: the AI5, a processor for Tesla‘s Full Self-Driving system, Cybercab and Optimus robot, and the D3, a radiation-hardened chip for SpaceX’s orbital satellite network.
Musk said 80% of the output would be directed toward space-based applications and 20% toward terrestrial use.
“We need the chips, so we build the Terafab,” Musk said at the event, framing the plant as essential to the company’s chip supply.
Tesla‘s finance chief confirmed at the event that the estimated $20 billion to $25 billion cost is not yet included in the company’s 2026 capital-expenditure plan, which already exceeds $20 billion.
Small-batch production of the AI5 is expected late this year, with volume output in 2027, though Tesla had already pushed the chip’s timeline to mid-2027 before the Terafab announcement.
A Long-Running Call
The merger thesis has escalated in stages.
In a February note, after the SpaceX-xAI all-stock combination, Ives wrote there was a growing chance Tesla would eventually be merged in some form into SpaceX over the following 12 to 18 months.
In late March, the firm said the Terafab announcement marked the start of a path likely to end in a merger in 2027.
This week’s note keeps the firm’s Outperform rating and a Street-high $600 price target on Tesla, which it reiterated in a separate note on Tuesday.
That target implied about 57.5% upside from the $380.85 level referenced in the earlier note.
The stock has since risen well above that level, closing 1.8% higher at $423.74 on Tuesday, which leaves the $600 target implying roughly 42% upside.
As of press time, the shares were trading 0.8% lower at $420.17 in Wednesday’s pre-market session.
A Deal That Would Consolidate Control
A merger would significantly increase Musk’s stake in the combined company.
He owns a far larger share of SpaceX than of Tesla, so a stock-for-stock deal would convert that holding into additional Tesla shares, consolidating his control.
That structural point has drawn scrutiny from others who follow the company, given SpaceX’s concentrated voting power, though Wedbush has framed the integration as a strategic positive.
The firm’s stance places it at the bullish end of a wide range of views on whether and when any deal might happen.
