RBC Capital sees a potential merger between Tesla, Inc. and SpaceX creating an 'orbit-to-ground' platform with over $1 trillion in long-term chip cost savings through Terafab, Elon Musk's vertically integrated semiconductor manufacturing complex. Tesla stocks slipped more than 1% in overnight trading heading into Wednesday, while SpaceX shares declined about 2%. RBC identifies Terafab as the clearest near-term synergy opportunity, estimating it could generate well over $1 trillion in chip-cost savings by 2050 compared with relying on external suppliers. Musk stated in Tesla's latest earnings call that there was 'more and more overlap' between the two companies, including Terafab, Starlink integration, and Digital Optimus development. The analysis comes as Tesla stocks have fallen roughly 32% year to date, making it the worst-performing member of the 'Magnificent Seven' technology stocks.
RBC Capital Lowers Tesla Price Target to $480, Estimates $1 Trillion Terafab Savings by 2050
RBC Capital lowered its Tesla price target to $480 from $500, implying a 56% upside from current levels, while maintaining an 'Outperform' rating. The brokerage stated that a potential Tesla-SpaceX merger could create a compelling 'vertical integration from orbit to ground' ecosystem spanning connectivity, autonomous vehicles and humanoid robotics that would be difficult to replicate.
RBC sees Terafab as the most tangible near-term synergy, estimating it could generate well over $1 trillion in chip-cost savings by 2050 compared with relying on external suppliers. Earlier this month, UBS estimated SpaceX could spend about $135 billion on wafer-fabrication equipment over the next five years, assuming 20% of its projected $1.1 trillion capital-spending program goes toward Terafab.
Musk Confirms Growing Tesla-SpaceX Overlap Through Terafab, Starlink, and Digital Optimus
Musk said in Tesla's latest earnings call that there was 'more and more overlap' with SpaceX and singled out Terafab as a 'gigantic project.' Tesla General Counsel Brandon Ehrhart said the companies had deepened their relationship earlier this year through an investment and framework agreement covering projects including Terafab and Digital Optimus.
Musk declined to discuss a combination directly, saying any such transaction would have to follow the appropriate process. The overlap already extends beyond chips. Musk said Starlink is being integrated into Cybercab and is expected to reach Tesla vehicles in markets where the satellite service operates, arguing reliable connectivity is essential for Robotaxis that cannot afford coverage gaps.
Tesla is also working with SpaceX on Digital Optimus, with Grok serving as a higher-level model that assigns tasks to the system. Tesla is developing Megapod compute systems that pair its AI hardware with conventional processors and can be deployed near available power infrastructure.
Musk said Terafab is 'necessary' to scale Optimus because Tesla otherwise risks running short of AI chips, adding that the project will need to address memory, logic and packaging. The company has already placed equipment orders for an Austin development fab designed to combine mask production, logic, memory, packaging and testing under one roof. Tesla is also advancing its AI5 and AI6 chips, with AI5 expected to initially go into Optimus.
Retail Traders Show Split Sentiment on Tesla and SpaceX Stocks
On Stocktwits, retail sentiment was split despite 'high' message volume, with Tesla traders turning 'bearish' while SpaceX sentiment remained 'bullish.'
One user said, '$SPCX mega short term bullish calls hitting the tape we over 125 tomorrow easy.'
Another user said, '$TSLA I wouldn't touch this until we get confirmation of a reversal. This stock is dangerous.'
SpaceX shares are down about 24% over the past month, while Tesla has fallen roughly 32% year to date, making it the worst-performing member of the 'Magnificent Seven.'
FAQ
What did RBC Capital say about a potential Tesla-SpaceX merger?
RBC Capital stated that a potential merger could create an 'orbit-to-ground' platform with over $1 trillion in long-term chip cost savings through Terafab by 2050. The brokerage lowered its Tesla price target to $480 from $500 while maintaining an 'Outperform' rating.
How much overlap exists between Tesla and SpaceX according to Musk?
Musk said in Tesla's latest earnings call that there was 'more and more overlap' between the companies, including Terafab, Starlink integration into Cybercab and Tesla vehicles, and Digital Optimus development. Tesla General Counsel Brandon Ehrhart confirmed the companies deepened their relationship earlier this year through an investment and framework agreement covering these projects.
How have Tesla and SpaceX stocks performed recently?
Tesla stocks slipped more than 1% in overnight trading heading into Wednesday and have fallen roughly 32% year to date, making it the worst-performing member of the 'Magnificent Seven' technology stocks. SpaceX shares declined about 2% in overnight trading and are down about 24% over the past month.
