What if SpaceX never goes public? What if instead, Elon Musk does something far stranger and folds his rocket company into Tesla Inc. (TSLA)?

That's the theory gaining traction among some high-profile investors and analysts. While Wall Street has spent years daydreaming about a blockbuster SpaceX IPO, billionaire investor Chamath Palihapitiya and Wedbush analyst Dan Ives are both suggesting Musk might have a different playbook entirely.

The Reverse Merger Theory

Palihapitiya kicked off the speculation in early January, calling the absence of a SpaceX IPO his "most contrarian take for 2026." Speaking on the "All-In" podcast, he argued that Musk will orchestrate a reverse merger instead, effectively absorbing SpaceX into Tesla.

"My contrarian belief is I don't think SpaceX will IPO … I think that it will reverse merge into Tesla, and I think Elon will use it as a moment to consolidate control and power of his two seminal assets into one cap table," Palihapitiya said.

His reasoning? Musk wants to avoid the dilution that comes with a traditional IPO and prefers to consolidate his "two seminal assets" under one roof. There's also the valuation angle: merging SpaceX into Tesla could push the combined entity toward a $3 trillion valuation, supercharging Tesla's market cap in the process.

The AI Angle

Dan Ives echoed similar thinking this week, though with a twist. He sees a "growing chance" that Tesla gets merged into a combined SpaceX-xAI entity, not the other way around.

"The view is this growing AI ecosystem will focus on Space and Earth together… and Musk will look to combine forces," Ives said.

His perspective makes sense given recent moves. SpaceX and xAI recently merged into a $1.25 trillion entity focused on orbital compute. Tesla also just disclosed in its fourth-quarter earnings that it's investing approximately $2 billion into xAI as part of Master Plan Part IV. The two companies signed a framework agreement to explore collaborations aimed at scaling Tesla's autonomous and robotic technologies.

Suddenly, the lines between Musk's companies are looking pretty blurry.

What Tesla Shareholders Should Know

A consolidation might elegantly solve funding challenges for Musk's Mars ambitions, but it creates some headaches for Tesla investors.

The Pure-Play Problem: Many institutional investors like Tesla because it's a pure-play bet on electric vehicles and energy. Folding in aerospace and AI assets could force funds with restricted mandates to dump their Tesla shares.

Regulatory Roadblocks: A merger of this magnitude would face serious antitrust and SEC scrutiny. Musk owns roughly 42% of SpaceX and about 13% of Tesla, which complicates the approval process considerably.

For now, Tesla investors are left waiting to see whether Musk pushes forward with a SpaceX IPO or continues consolidating his empire into one sprawling conglomerate. Either way, it's clear the boundaries between his companies are becoming increasingly artificial.