JPMorgan’s call reinforces the market’s shift toward valuing SpaceX as an AI infrastructure company rather than a launch and satellite business. That raises the stakes on its ability to build compute capacity and fund it. For Tesla shareholders, a 30% to 35% premium framework gives the merger speculation a concrete reference point and may help underpin the shares while the special committees do their work. China remains the main overhang, given Tesla’s exposure to the Chinese market and SpaceX’s defence ties. Any deal structure that ring-fences or spins off that business would carry its own valuation questions. The heavy capital needs JPMorgan flags also feed into the wider debate over AI-related financing, with SpaceX saying it is not considering an equity raise.---Yesterday:SpaceX beats Q3 forecasts across all three segments as AI revenue tops $7.5 billion--- JPMorgan now values SpaceX more as an AI powerhouse than a rocket company, and it has already sketched out what Tesla shareholders might be offered if Musk brings his two biggest companies together.Summary:JPMorgan raised its SpaceX price target to $500 from $240 and kept an Overweight rating after the company’s third-quarter resultsThe bank more than doubled its 2027 and 2028 estimates, naming superintelligence as the main growth driverIt forecasts 2027 revenue of about $254 billion, and bases its target on 20 times its 2028 earnings per share estimate of about $24JPMorgan flagged execution risks around expanding compute capacity, raising capital and sustaining demand; SpaceX told the bank it is not considering an equity raiseIt sees any Tesla merger as a likely SpaceX-led all-stock deal at a 30% to 35% premium to Tesla’s share price, with Musk keeping more than 50% voting controlChina is the key regulatory hurdle, and JPMorgan kept its Neutral rating and $415 target on TeslaJPMorgan has more than doubled its price target on SpaceX to $500 from $240, keeping an Overweight rating after the company’s third-quarter results. The bank argues that artificial intelligence, rather than its launch business, is now the main driver of the company’s growth.Analyst Doug Anmuth said SpaceX beat sales expectations across all three of its business segments, and he identified superintelligence as the principal growth engine. JPMorgan more than doubled its 2027 and 2028 forecasts and now expects 2027 revenue of about $254 billion. It projects annual recurring revenue of about $400 billion by the end of 2027, below management’s own expected range of $500 billion to $1 trillion. The new target is based on 20 times JPMorgan’s 2028 earnings per share estimate of about $24.The bank cautioned that reaching those estimates will require significant execution, including building out compute capacity, securing substantial capital and sustaining strong demand. SpaceX expects to have 2 to 3 gigawatts of compute capacity by the end of 2026 and plans to add 10 gigawatts in 2027. It told JPMorgan it is not considering raising equity.The note also addresses a potential combination with Tesla, after Elon Musk said on SpaceX’s earnings call that both companies had formed special committees to discuss a merger. JPMorgan sees the most likely structure as a SpaceX-led, all-stock deal at a 30% to 35% premium to Tesla’s share price. It would be structured as a merger of equals that keeps Musk’s voting control above 50%. The bank described the strategic logic as coherent, pointing to shared engineering talent, AI infrastructure, the Terafab chip facility in Texas and Musk’s leadership.Shareholder and regulatory approval are the key hurdles, according to JPMorgan, with China the particular challenge given SpaceX’s ties to the US government and defence sector. Possible solutions include ring-fencing Tesla’s China operations or transferring control of them to a China-based consortium. Under that arrangement, Tesla could continue to earn revenue by licensing its brand and Full Self-Driving technology.JPMorgan kept its Neutral rating and $415 price target on Tesla. SpaceX reported third-quarter revenue of about $14.6 billion, up 161% from a year earlier, with adjusted EBITDA up about 306% to around $8.8 billion, both ahead of consensus. This article was written by Eamonn Sheridan at investinglive.com.