Video highlights

Elon Musk may be about to pull off a merger of Tesla and SpaceX into one empire worth over $3.7 trillion, and traders are already betting real money that it happens.

The central question the host says nobody agrees on is whether combining them would create an unstoppable machine or quietly destroy what makes each one special.

In January, Bloomberg reported that SpaceX had genuinely looked at combining with Tesla. Since then, Musk folded his AI company xAI into SpaceX, and this year SpaceX went public, so shares of both companies can now be bought.

Prediction markets put about 65% odds on a merger within a couple of years, but the host cautions that some of those markets are tiny and should not be read as certainty.

Tesla is worth about $1.5 trillion and SpaceX about $2.2 trillion, roughly $3.7 trillion combined. Tesla has a profitable car business but pours cash into new bets, while SpaceX has a highly profitable Starlink business but burns cash fast on rockets and AI.

In one quarter Tesla spent about $6 billion on building and expansion, while SpaceX spent over $18 billion. SpaceX holds about $100 billion in cash against Tesla's roughly $43 billion. The host notes a merger alone would not close that gap.

Last quarter Tesla's revenue jumped 25%, yet profit from its main business fell by more than that. The host attributes this to heavy spending on robots, self-driving and AI, which shareholders are paying for now.

Deliveries slipped about 2%, and in Europe Tesla is losing ground fast to Volkswagen.

Optimus production will start slowly because nearly every part must be built from scratch. Tesla Energy is growing, but its profit margin fell from about 30% to 20%. The services business, covering charging, software and insurance, jumped about 50% to $4.6 billion, while research spending rose nearly 50%.

Bulls point out that Tesla uniquely combines manufacturing, software and energy under one roof, and that if self-driving truly works each car could become a money machine. The catch is that it must be genuinely safe and cheap per mile. The battery business also has a long runway.

The host says the thing to watch is whether SpaceX actually signs up many paying mobile customers at a good price, not just people in remote areas.

The host points to Terafab, a planned chip factory in Texas, as the most concrete link between Tesla and SpaceX. Intel is confirmed to be involved by lending its chipmaking technology, and Taiwan Semiconductor may simply rent out space.

Running a cutting-edge chip factory is one of the hardest things humans do, and a small error can ruin a whole batch. The host says precision usually beats speed, so the real question is whether Musk can make chips at a cost that makes sense.

Bulls argue the merger would put hardware, chips, energy, robots and satellites under one master plan, give Terafab a single coordinated buyer, and naturally match Tesla batteries with SpaceX's power-hungry AI data centers. Starlink could also connect Tesla cars and robots worldwide.

Bears argue the industries are too different for one leadership team to master, that profitable Starlink and Tesla Energy could end up paying for money-losing projects, and that SpaceX's defense work could collide with Tesla's large presence in China. They also argue the companies already capture most of the benefits through contracts such as the Megapack sales and the shared chip factory.

Almost all of the value in both companies rides on futures still to be built.

The host calls it a tough go unless one accepts a very high multiple. He also notes analysts expect revenue to more than double from $106 billion to $240 billion.

The host models ten years with revenue growth of 10, 20 and 30%, against roughly 20% a year over the past five years, and profit and free cash flow scenarios that he says exceed what Tesla has historically achieved.

Even with these aggressive inputs, the stock analyzer's middle value is about $370 against a price near $380. The host concludes Tesla is still overpriced on middle assumptions, and he calls it a hard company to forecast.

SpaceX has a market cap of about $2.2 trillion and an enterprise value of about $2.14 trillion, with more cash than debt. It recorded negative free cash flow of $14 billion and negative net income of $5 billion on $19 billion in revenue, which the host puts at about 116 times sales.

The host notes that Tesla at 13 times sales already seemed egregious and that Microsoft and Google trade around 8 to 10 times sales. He says SpaceX is even harder to evaluate because there is little data, and that a Tesla shareholder should be wary of a merger.

The host believes Musk badly wants to own the world's largest single company and would bet on a merger happening, though he says that does not mean it is guaranteed and expects significant regulatory pushback.

He argues a merger would take longer for value to emerge and could diminish value, and that Tesla should be split between cars and its other products. He says he is not in favor of the merger.