- Elon Musk denied a report that Tesla is preparing to separate its China business, calling it “absurdly fake news.”
- Advisers have discussed a China spinoff, sale, or closure as part of geopolitical contingency planning that could ease a potential SpaceX merger.
- SpaceX stock has fallen roughly 17% below its IPO price, and Morningstar’s $63 fair value estimate implies 44% downside from current levels.
- SpaceX reports its first earnings as a public company on Aug. 4, with Starlink growth and AI spending under scrutiny.
Tesla, Inc. (TSLA) shares jumped 2% overnight after CEO Elon Musk denied a report that the company was preparing to separate its China business ahead of a possible SpaceX merger, calling the claim “absurdly fake news” on X.
TSLA stock surged 10% on Thursday but remains down 37% for the month and on track for its worst monthly performance since December 2022. SpaceX rose 1% in overnight trading but remains on pace for a fourth straight weekly loss, having finished in the red in five of its seven trading weeks since going public.
According to a WSJ report, Tesla executives have been told to prepare for a possible separation of the China business, with advisers discussing options including a spinoff, sale, or closure. A carveout could reduce regulatory complications related to SpaceX’s role as a major U.S. defense contractor, as SpaceX launches classified payloads and generated 20.9% of its 2025 business from U.S. government customers.
Consequently, a merger could draw scrutiny from Beijing over factory know-how, supply chains, and data related to two million Tesla owners in China. When asked about combining the companies at Tesla’s earnings call, Musk said: “Obviously we can’t talk about, you know, combining companies and that kind of thing on earnings calls.” He added: “It is got to be done with the appropriate process.”
Meanwhile, any deal would link Tesla investors to a SpaceX stock that has struggled since its June IPO. SpaceX priced at $135, briefly traded near $200, and later fell to a closing low of $112.55, about 17% below its IPO price. Morningstar assigns SpaceX a $63 fair value estimate, implying a 44% downside from current levels. “We see the shares as overvalued based on the fundamentals and the uncertainty around ROI on AI investments,” the brokerage said.
SpaceX lost nearly $5 billion on $18.7 billion in revenue in 2025 and another roughly $4.28 billion in the first quarter of 2026. Starlink remains its earnings engine, while AI investment continues to climb. “AI spending and capex are still mushrooming, and we don’t expect AI to be profitable for a long time,” a Morningstar analyst said.
SpaceX reports its first earnings as a public company on Aug. 4, putting Starlink growth, AI revenue, and spending under scrutiny just as Tesla investors debate whether the China firewall could become groundwork for a much bigger Musk corporate reshuffle.
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