Investor Dan Ives, who is the managing director of Wedbush Securities, thinks that the Tesla Inc. (NASDAQ:TSLA) Terafab AI chip project could be hinting towards a possible SpaceX merger next year.

Terafab Would Pave The Way For SpaceX-Tesla Merger

In a new investor note released on Tuesday, Ives reaffirmed bullish sentiments for Elon Musk’s enterprises. He shared that the project would let Tesla ramp up its AI efforts, as current suppliers, including Micron Technology Inc. (NASDAQ:MU), Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) and Samsung Electronics Co. Ltd. (OTC:SSNGY), “are unable to meet future demand for TSLA's AI strategy.”

Ives also said that while the cost of the Terafab project was projected to be around $25 billion, “the initial production target is expected to reach 100k wafer starts per month,” with potential to “scale to 1 million wafer starts per month,” as demand for AI compute within Musk’s enterprises exceeds supply.

In the note, the investor also acknowledged that, while the timeline for the project wasn’t set in stone, the project was crucial for Musk’s AI efforts. Ives then said that the Terafab was “the first step to ultimately what will be Tesla and SpaceX combining forces in a merger likely in 2027.”

The investor, towards the end of the note, maintained an “OUTPERFORM rating” for Tesla, as well as a price target of $600. Tesla is currently valued at close to $383. A $600 price target would demonstrate a nearly 55% upside for the stock.

Gary Black Cautions Against Merger

Meanwhile, investor Gary Black of The Future Fund LLC cautioned against the merger, citing concerns with the dilution of Tesla’s stock value. He also predicted that any merger or acquisition between the enterprises would result in a 20%-25% reduction in the value of the EV giant’s shares.

He had earlier also shared that even if SpaceX were to buy Tesla following the public listing of its shares, it would result in short-term gains for Tesla investors, but ultimately, investors of the company who believed in its EV vision would sell their stake.

SpaceX’s IPO

Reports have emerged that say that SpaceX could file for its IPO as early as this week, with the company reportedly targeting raising over $75 billion through the IPO. SpaceX is also said to be targeting a $1.75 trillion valuation, as confirmed by Musk in a social media post earlier this month.

According to Benzinga Edge Rankings, Tesla scores well on the Momentum metric and also offers a favorable price trend in the Long term.

Price Action: TSLA gained 0.57% to $383.03 at market close on Tuesday, further surging 2.34% to $389.76 during pre-market.

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