The $3.5T Bailout: Elon's Plan To Merge Tesla And SpaceX

Tesla–SpaceX Merger

Elon Musk confirmed that special committees at Tesla and SpaceX are evaluating a possible merger. The hosts said prediction-market traders put the odds of a deal by 2028 at about 81%. They discussed a potential combined valuation of roughly $3.5 trillion, while stressing that a deal is not yet certain.

The hosts contrasted the companies’ recent performance: Tesla’s revenue was flat, deliveries fell, and operating profit declined sharply, while SpaceX reported strong revenue growth and profits. Scott Galloway and Ed Elson argued that a merger could benefit Tesla shareholders by exchanging exposure to a struggling auto business for exposure to SpaceX’s growth story. They also cautioned that SpaceX’s valuation is difficult to assess because only a small portion of its stock is publicly traded.

The hosts questioned whether a merger would primarily serve Musk’s interests. They suggested it could give him greater control of the combined company, potentially at the expense of Tesla shareholders’ voting power. They also viewed the deal as a way to shift attention from Tesla’s weaker results to future promises involving AI, robotics, space-based data centers, and other projects.

Although the companies may have operational links—including Tesla batteries and vehicles used by SpaceX—the hosts questioned whether those synergies justify the valuations.

They also speculated that acquiring Tesla could help SpaceX qualify for S&P 500 inclusion through an exception to the index’s usual requirements. They presented this as a possibility, not an established outcome.

Musk, Governance, and Ukraine

The hosts discussed reports that Starlink connectivity used by Ukrainian forces had been disrupted, and Musk’s denial that he personally made the decision. They argued that Musk’s role in a conflict affecting Western security deserves scrutiny and predicted that Congress could investigate, particularly if Democrats gain control.

They also criticized the concentration of political and corporate influence in the hands of wealthy individuals. The discussion was strongly opinionated: the hosts agreed that Musk should face questions, while acknowledging that any investigation should be based on evidence rather than political hostility.

AI Investment and Data Centers

The episode’s featured number was $750 billion—the approximate amount the hosts said Meta, Amazon, Microsoft, and Alphabet plan to spend on capital investment this year.

The hosts examined reports that Amazon has expensive Nvidia servers and other AI equipment waiting in warehouses, alongside delays, cancellations, or weak market receptions for some data-center projects. Ed Elson saw these as signs that companies may have overestimated how quickly they could build and monetize AI infrastructure. He emphasized negative free cash flow, heavy borrowing, and uncertainty about whether the spending will generate adequate returns. He warned that highly leveraged data-center providers could fail if their projects take too long to produce revenue.

Scott Galloway agreed that a correction is possible but argued that the evidence pointed more to a slowdown than an imminent collapse. He noted that cloud operating margins at Amazon and Google had risen, suggesting demand remained strong and that electricity and construction capacity—not simply a lack of customers—could be limiting growth.

Both hosts said the AI buildout could follow a boom-and-bust pattern: the technology may prove transformative even if some companies that financed it go bankrupt. They saw public markets as increasingly attentive to those risks, while private-market valuations appeared more vulnerable to overoptimism.

The hosts also discussed reports of Anthropic’s large accounting loss. Much of the headline figure was attributed to the accounting treatment of convertible debt; the underlying loss was described as considerably smaller, though still substantial relative to revenue. They differed somewhat over how much confidence to place in the company’s growth and financial prospects.

Meta’s filing that raising capital had become more difficult prompted further debate. Ed interpreted it as evidence of tighter financing conditions for AI companies. Scott agreed that funding could become harder but also viewed Meta’s comments in light of its enormous planned capital spending and Zuckerberg’s interest in maintaining control.

Week Ahead and Predictions

The hosts previewed personal-consumption expenditures data, consumer confidence, a Federal Reserve rate decision—with markets expecting rates to remain unchanged—and earnings from companies including Visa, Coca-Cola, Boeing, Google, Microsoft, Amazon, Eli Lilly, Intel, and SanDisk.

Their predictions included:

• Eli Lilly: Scott predicted that the company’s GLP-1 business could exceed already ambitious expectations.
• Meta: Ed identified Meta as a likely AI winner, and Scott agreed, citing its vast user and business reach, advertising distribution, and ability to apply AI to its core products.
• SpaceX: Ed predicted that SpaceX could enter the S&P 500 through a Tesla acquisition, despite not meeting the index’s normal criteria.

Presenters and Contributors

• Scott Galloway
• Ed Elson