Elon Musk sees ”a lot of merit” in combining Tesla and SpaceX, but the decision is not his to make: two special committees he cannot join and a Tesla shareholder vote he calls a high hurdle stand in the way.

That tension runs through a deal that many analysts call inevitable. Musk, a self-described ’conflicted party’, said the committees are yet to agree on the terms and a merger is not certain, even though Wall Street expects a deal by the end of next year.

Tesla shares gained more than 3% while SpaceX rose 12% and were on track for their biggest percentage gain since early August.

SpaceX and Tesla are jointly developing the Terafab chip plant, and AI now makes up more than half of SpaceX’s revenue, with another $35 billion to $40 billion spending likely in fourth quarter to fund further expansion.

”I think a Tesla-SpaceX merger makes sense. It’s very strategic because both companies are rapidly transitioning into artificial intelligence and autonomous systems, and both have huge infrastructure projects underway,” said Justus Parmar, CEO of Fortuna Investments and an investor in both companies.

”It would also avoid redundancy and the time he spends going back and forth between two entities, and there would be a reduction in public company overhead, legal costs and administrative burdens.”

Analysts have said that burgeoning capital spending for expensive AI and space infrastructure would weigh on SpaceX’s free cash flow, a strain a combined company could ease by sharing services and borrowing jointly with Tesla.

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