Elon Musk said on Tuesday that a merger of his two companies SpaceX and Tesla would be "a good idea" and that they had formed special committees to discuss a union, sending shares of the space and technology company up 8% in extended trading.

The company earlier posted its first profit as a public company and Musk said he expected annual recurring revenue of between $500 billion and $1 trillion by the end of 2027, as demand for its data-center space surges thanks to the AI boom.

Musk has in the past tantalised shareholders with the idea of combining SpaceX and Tesla, citing growing overlap between them. Speculation about the space company buying the EV maker has gained traction recently, with Barclays suggesting last week that a deal could be announced before Tesla’s annual meeting in December.

"I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk said in the first official confirmation that the companies were formally talking. ”Because I’m a conflicted party, I can’t actually be in the discussions of the special committees,” which comprised independent directors, he told investors on a conference call.

The companies had formed the special committees at the request of shareholders, who ultimately would need to approve a deal, he added.

"I do think there’s a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there’s a lot to be gained from cooperating on developing superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starmind constellation, connectivity,” he said.

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