Tesla and xAI to merge? Hedge fund tycoon: It feels inevitable.

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The possibility of a merger between Tesla and Musk’s AI startup xAI is evolving from market speculation to a serious discussion.

On Sunday, Anthony Scaramucci, founder of SkyBridge Capital, posted on social platform X, stating that as Musk accelerates the integration of AI into his business landscape, a merger between Tesla and xAI “feels inevitable.” This comment has added further fuel to already heightened merger expectations.

Scaramucci's post came after news broke that Tesla shareholders had submitted a formal proposal. According to reports, the proposal urges Tesla’s board to authorize an investment in xAI, marking the first time capital ties between the two companies have been put on the official agenda.

A deeper signal is hidden in Musk’s newly disclosed ten-year compensation plan by Tesla. As previously mentioned by Wallstreetcn, according to Morgan Stanley’s analysis, the plan contains a key term allowing for the adjustment of performance targets in the event of a “significant” acquisition. This has been widely interpreted as paving the way for a potential future merger with xAI, making the synergy between the two companies part of Tesla’s long-term strategy.

Shareholder Proposal Fuels Rising Merger Expectations

The direct driver for linking Tesla with xAI comes from investors themselves. According to Tesla’s proxy statement, Stephen Hawk, a 56-year-old investor from Florida, submitted a shareholder proposal suggesting the company invest in xAI. This proposal, along with Musk’s highly controversial compensation plan, will be put to a vote at the company’s annual shareholder meeting on November 6.

In an email, Stephen Hawk stated that his inspiration came from Musk’s previous social media posts hinting at collaboration between the two parties. He believes that “formally establishing this partnership is critical to ensuring clear mutual interests.”

In fact, Musk himself is open to the idea. Not only has he sought input from fans on X about this, but he also stated to investors in July that “We will act according to the will of the shareholders.” This means the results of the shareholder vote could be a key step in determining the future relationship between the two companies.

Musk’s New Compensation Plan Hints at Merger Signal

For investors, perhaps more substantial than the shareholder proposal is Musk’s long-term compensation plan, which could be worth up to $1 trillion.

Earlier this month, Morgan Stanley analysts including Adam Jonas pointed out in a report that the plan aims to allay investor concerns about Musk’s attention being divided among xAI, SpaceX, and other companies.

The report stated that Musk has made it clear he wants to hold at least 25% equity in Tesla in order to have veto power over corporate control changes, and the new plan provides an incentive path for just this. More importantly, a supplemental clause about acquisitions has drawn high attention from the market. This clause specifies that “Market capitalization and adjusted EBITDA milestone targets may be adjusted to account for Tesla acquisitions deemed to have a significant impact on milestone achievement.”

Analysts believe this language leaves institutional flexibility for future alignment of interests between Tesla and xAI. Morgan Stanley’s report directly states that this provides a clear “interface” for a merger between the two companies, indicating such integration is already under long-term strategic consideration at Tesla.

Tesla's Valuation May Hit $8.5 Trillion

Expectations for a merger are built upon existing synergies between the two companies.

Musk has always positioned Tesla as a “real-world AI” company, with its core focused on autonomous driving and the Optimus humanoid robot. The Grok large language model developed by xAI is now integrated into Optimus and some Tesla vehicles as an AI companion. In addition, xAI has also purchased Tesla’s industrial batteries to power its data centers.

Some analysts believe the merger will unleash enormous value. Well-known tech analyst and Deepwater Asset Management co-founder Gene Munster suggested earlier this month that the combination of Tesla and xAI could help the former achieve the ambitious goal of an $8.5 trillion market cap.

Now, this view is becoming mainstream. With xAI itself already valued above $100 billion and seeking a valuation as high as $200 billion, how to enable Tesla shareholders to share in the massive gains from its AI breakthroughs is becoming a critical issue Musk must address.

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