Tesla Stock Faces Retail Whiplash As Musk Shifts Focus To $1.25T SpaceX-xAI Merger

• Tesla retail was largely bearish after Musk announced plans to combine SpaceX and xAI, raising concerns that Tesla could be sidelined.
• Gary Black warned that any Tesla–SpaceX merger would likely be dilutive and add earnings volatility, favoring SpaceX over Tesla shareholders.
• SpaceX is still reportedly expected to pursue an IPO later this year, which could raise as much as $50 billion.

Shares of Tesla, Inc. were caught in a debate among retail investors on Monday after news that Elon Musk is combining SpaceX and xAI into a single entity valued at $1.25 trillion, raising fresh questions about Tesla’s place within it.

Musk Builds A $1.25 Trillion AI-Space Giant

SpaceX said it acquired xAI in an all-stock transaction that values SpaceX at $1 trillion and xAI at $250 billion, according to a Bloomberg report, citing people familiar with the matter. Musk said the combination is intended to create a "vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform."

The move further concentrates Musk’s private ventures at a time when xAI is burning roughly $1 billion a month, while SpaceX’s Starlink satellite network has become its largest revenue driver. SpaceX is still reportedly expected to pursue an initial public offering later this year, which could raise as much as $50 billion.

Why Tesla Is Under Fresh Scrutiny

Although Tesla is not part of the transaction, retail investors are reassessing Musk’s priorities. Tesla has faced slowing EV demand following the loss of U.S. tax credits, intensifying global competition, and recent strategic shifts, including Musk’s comment during last week's earnings call that Tesla would end production of its Model S and Model X vehicles to repurpose factory space for humanoid robots. The EV maker also announced a $2 billion investment in xAI last week.

Meanwhile, Tesla was also part of the merger talk as an alternative combination with xAI, according to a Bloomberg report. Early Tesla investor and founder of Social Capital, Chamath Palihapitiya, likened the idea to a modern-day Berkshire Hathaway, saying it could create “one equity instrument for all things Elon.” 

Tesla-SpaceX Merger Math Raises Red Flags

Separately, Gary Black, managing partner at The Future Fund, raised concerns about the financial logic of a potential Tesla-SpaceX combination. Black said that such a merger would likely significantly dilute Tesla stockholders, as Tesla would have to issue a large number of new shares to fund the buyout.

Black also said merging SpaceX into Tesla would introduce earnings volatility from the space and communications sectors, which he believes many institutional investors would not welcome. He added that Tesla has underperformed the Nasdaq over both one-year and five-year periods, and said the merger math appears to favor SpaceX more than Tesla shareholders.

What Retail Traders Are Saying

On Stocktwits, retail sentiment for Tesla was ‘extremely bearish’ amid ‘high’ message volume.

One user warned that Musk’s focus appears to be shifting toward SpaceX, leaving Tesla with a narrowing product lineup and weakening sales momentum, while warning that the stock’s valuation leaves retail investors vulnerable to losses.

Another user cautioned that Tesla’s exclusion from the SpaceX-xAI merger could weigh on the stock in the near term, warning of a possible “rug pull” in the coming days. 

“Giving investors other avenues to invest in Musk aside from TSLA will see money flow out of here and into those new entities. Of course, they will want to pump it first. Sweep liquidity to the upside,” they added.

Others went further, predicting dilution in the stock and saying it will “crash and burn.”

However, not all retail voices were bearish. One user wrote, “this is bullish. I’m expecting a warrant issued to Tesla shareholders for SpaceX shares.”

Another argued Tesla could benefit operationally: “$TSLA Spacex will need a lot more energy, and energy storage solutions. I think the new merged company will become Tesla’s number one customer.”

Another user echoed the benefits of the deal and said Tesla could ultimately benefit from the SpaceX-xAI merger by supplying key technologies and products, including energy storage, solar solutions, trucks, semis, autonomy software and robotics, noting that SpaceX already relies on several of these capabilities.

Some traders even speculated about a much larger future combination and said, “Elon might merge w Tesla next. Make this all combine to $4-5 trillion company. Be like Nvidia Google etc.”

Tesla’s stock has risen 4% over the past 12 months.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Share

·

Add us on