Tesla’s Next Chapter: Acquiring xAI?

An AI giant spanning both the digital and physical worlds, with a potential valuation of up to $8.5 trillion, is emerging.

Written by: Silicon Rabbit

In the world of technology and capital, some rumors start as hushed whispers on enthusiast forums, then ferment into speculative reports in financial media, and ultimately, they make their way onto the most serious agendas in a manner that cannot be ignored.

The merger of Tesla and Elon Musk’s other AI startup, xAI, is precisely such a prophecy that is gradually becoming reality.

Last Sunday, a tweet from SkyBridge Capital founder Anthony Scaramucci added fuel to this already heated expectation. He stated bluntly: As Musk accelerates the integration of AI into his business empire, a merger between Tesla and xAI “feels inevitable.”

This is not an isolated call. When a shareholder proposal urging Tesla to invest in xAI was formally submitted, and when a “merger clause” hidden in Musk’s potentially trillion-dollar new compensation plan was uncovered by Morgan Stanley, everyone realized: an AI giant spanning the digital and physical worlds, with a potential valuation of up to $8.5 trillion, is surfacing.

Behind this, is it just capital’s wild imagination, or is it Musk’s strategic layout? Today, based on discussions with his expert team, Silicon Rabbit will deeply analyze the possibility of this century-defining merger and what it means for the future of AI.

To merge a red-hot unicorn with a valuation in the tens of billions (xAI) into a trillion-dollar giant (Tesla) is by no means a whimsical or impulsive move. From four key signals, we can clearly see how this path is being paved step by step.

1. A Proposal: From Grassroots Voice to Formal Agenda

It all began with a Tesla retail shareholder named Stephen Hawk. His formal proposal suggested the company invest in xAI and will be put to a vote at the company’s annual shareholder meeting on November 6.

This seemingly insignificant step carries immense symbolic weight. It marks the first time that the “capital union of Tesla and xAI” has moved from public discussion into the formal agenda of corporate governance.

As Hawk himself said, his inspiration came directly from Musk’s hints on social media. He believes, “Formally establishing this partnership is crucial to ensuring both parties’ clear common interests.” This represents the voice of the most loyal investors: when we invest in Tesla, we are investing in Musk’s AI vision, and we do not want xAI’s huge success to be irrelevant to us.

2. Trillion-Dollar Compensation: The “Merger Clause” Hidden in the Details

If the shareholder proposal is a “bottom-up” push, then Musk’s new ten-year compensation plan is a “top-down” design. This plan is seen by top investment banks like Morgan Stanley as the “key” to unlocking the merger mystery.

Adam Jonas, an analyst at Morgan Stanley, keenly pointed out that a supplementary clause about acquisitions in the plan is the key to the puzzle:

“Milestone targets for market capitalization and adjusted EBITDA may be adjusted to account for Tesla acquisition activities deemed to have a significant impact on milestone achievement.”

Translated from this convoluted language: if Tesla makes a “major” acquisition in the future (such as xAI), then Musk’s performance targets can be adjusted accordingly.

Wall Street’s interpretation is straightforward: this is the most flexible institutional interface reserved for a future merger with xAI. It shows that this potential merger has long been in Tesla’s long-term strategic toolbox, just waiting for the right time.

3. Musk’s Own 25% Control

Musk himself does not hide his openness to a merger. He has not only publicly solicited fans’ opinions on the X platform but also told investors directly that he will “act according to shareholders’ wishes.”

Behind this is his deep consideration of control over Tesla. Musk has repeatedly stated that he hopes to hold at least 25% of Tesla’s shares to have veto power in any change of company control. However, simply increasing his holdings in the secondary market would be extremely costly.

By merging xAI, this problem can be perfectly solved. Musk holds a large stake in xAI, and if xAI is acquired by Tesla, his xAI shares would be converted into new Tesla shares. This would not only significantly increase his shareholding ratio but also address investors’ concerns about his divided attention, locking all core businesses firmly within Tesla as the main platform—killing two birds with one stone.

4. Wall Street’s Frenzy

The capital market’s pursuit of stories is greedy. When well-known Deepwater Asset Management analyst Gene Munster declared that “the combination of Tesla and xAI could help the former’s market cap reach $8.5 trillion,” all of Wall Street was ignited.

Behind this view is a fundamental re-evaluation of Tesla’s business model—it will no longer be seen merely as an electric vehicle or energy company, but as a true end-to-end, integrated hardware and software AI platform company. Such a company should enjoy an “AI valuation premium” far higher than that of manufacturing.

The market’s frenzy must be built on solid business logic. The reason why the merger of Tesla and xAI is considered a “match made in heaven” is because they each occupy one pole of the AI world, and each is the missing piece the other needs most.

1. The Last Piece of the Map

Musk has repeatedly emphasized that Tesla is a “real-world AI company.” Its core mission is to enable AI to understand and interact with the physical world. This is specifically reflected in:

Autonomous Driving (FSD): Teaching cars to see, understand, and make decisions in complex physical traffic environments.

Humanoid Robot (Optimus): Robots performing tasks in factories, homes, and other unstructured physical spaces.

Meanwhile, xAI focuses on “AI for the digital world.” Its core product, the Grok large language model, is dedicated to understanding and generating human language, code, and logic.

For hardware carriers like Optimus, the ability to perceive and act in the physical world is its “body,” while the cognitive and reasoning abilities of language models are its “soul.”

Only when the two are deeply integrated can it understand complex instructions and break them down into actions. The merger of Tesla and xAI is precisely to create such a “body and soul unified” general AI entity.

2. The Ultimate Closed Loop from “Seeing” to “Understanding”

The competition in AI ultimately comes down to data. Tesla possesses the world’s largest and still exponentially growing real-world driving video data, which is the most valuable resource for training physical world AI.

But in the past, this data was mostly used for “perception” tasks, such as recognizing vehicles, pedestrians, and lane lines. After merging with xAI, Grok’s powerful multimodal capabilities can provide deeper “annotation” and “understanding” of this massive video data, forming an unparalleled data flywheel:

Tesla’s fleet collects massive video data -> Grok model deeply understands and logically annotates the videos in the cloud -> trains smarter FSD and Optimus models -> deployed to fleets and robots, performing better, thus encouraging more users to use and generate higher-quality data -> cycle repeats, exponential evolution.

Once this flywheel starts spinning, its barriers will be so high that any competitor will be left far behind.

3. Deep Coupling of Hardware and Software

The endgame of the large model race is bound to be a competition of vertical integration between hardware and software. You not only need the best algorithms but also the most efficient chips and data center architectures tailored for your algorithms.

Tesla has its self-developed Dojo chip, xAI has the Grok model. After the merger, they can achieve ultimate optimization from underlying chip design, to data center construction, to upper-level model training, converting every watt of energy into effective computing power.

In fact, the synergy between the two companies has already quietly begun: Grok has been integrated into some Tesla vehicles and Optimus prototypes; and xAI’s computing power center is powered by Tesla Energy’s Megapack industrial energy storage batteries to ensure stable electricity supply.

When all logic points to a merger, the remaining questions are: when and how.

For Tesla shareholders, this is an urgent issue. As xAI’s valuation skyrockets from tens of billions to seeking new financing at $200 billion, Tesla investors are unable to directly share in the biggest dividends of this AI revolution, which is undoubtedly agonizing.

The merger of Tesla and xAI is by no means a simple “left hand to right hand” capital game. It is an inevitable step for Musk to build an unprecedented AI vertical integration empire—from underlying energy, to custom chips, to supercomputing power, to top algorithms, and finally landing on the two major physical carriers of cars and robots.

The shareholder meeting on November 6 will be a key moment in this drama. Regardless of the voting outcome, what we are witnessing may not just be a corporate restructuring, but the dawn of a new AI era.