Despite a drop in the SpaceX share price denying him the status of trillionaire, Elon Musk is still the richest man alive. He is also one of the most influential, with over 240m followers on X, the social media platform he owns. But has he over-extended himself? And if so, what does it means for investors of his companies, SpaceX and Tesla, as well as the wider market?
Musk’s prowess as a businessman is undoubted. Having earned $175m from his early involvement in PayPal and its progenitors, he then invested in Tesla and led it to transform the electric vehicle (EV) market. He followed it up by founding SpaceX and making it the leading space firm along with its ubiquitous Starlink satellite communication service. He is now attempting to become a major player in the AI boom with xAI which along with X has been merged in with SpaceX.
However, I fear that Musk’s reputation may be leading to his companies being grossly over-valued. Furthermore, his AI ambitions, including building data centres in space, may prove over-ambitious. In reaching for the stars, there is a real risk that SpaceX and Musk could crash and burn.
Taking Tesla first, this appears to recovering after a difficult 2025, when automotive revenues were down 10% year on year and profits fell by a similar amount [1]. In its latest SEC filing for the quarter ending 30th June 2026 [2], automotive revenues in H1, 2026 were up 20% on the same period last year, while gross operating profits were up 35% before R&D and overheads. This is despite a sharp drop in carbon-emission related regulatory credits following a change by the Trump administration, which were worth over $2bn to Tesla in 2025 - or roughly half of profits.
While welcome, this recovery in car sales and profits does not justify the current valuation of Tesla with a price / earnings ratio of 300+ [3]. Tesla cars face increasing competition from Chinese EV makers which now account for over 60% of global EV sales [4], which is likely to inhibit sales growth and margins.
Instead, Tesla’s valuation appears to be based on Musk’s vision for humanoid robots and self-driving cars and taxis built by Tesla. Tesla invested over $4bn in R&D in H1 2026, up 40%+ on the same period last year [2], and is starting to re-purpose assembly lines for the mass production of its Optimus robot [5]. However, it is not clear if such investments will pay off, let alone justify Tesla’s stratospheric valuation.
Taking self-driving cars and taxis first, in the US, Tesla is lagging behind Waymo. Whereas Waymo attained level 4 certification last year, allowing its cars to operate in certain areas without direct human supervision [6], Tesla only attained such certification in Texas in May, and even then its fleet is smaller [7].
Tesla also faces significant legal and regulatory challenges to its self-driving technology. In August last year, it was hit with a bill for $243m in damages related to a crash involving its self-driving technology. While it is appealing, it faces other lawsuits and regulatory investigations amid concerns about the safety of its technology, which relies only on cameras whereas Waymo also uses LiDAR sensors [8].
Even if Tesla closes the gap with Waymo and addresses safety concerns, it also faces a threat from Chinese self-driving cars and taxis. These benefit from state backing and are being tested in over 50 cities, twice as many as in the US. They also benefit from local supply chains, with a lot of the sensors required by self-driving cars produced in China [9]. While held back by low fares in China, they are expanding aggressively abroad and may secure “first mover” advantage in European and other markets [10].
Considering humanoid robots, there are the technological challenges involved in keeping a bipedal robot upright, let alone taking on tasks humans can perform. It is noteworthy that in April last year, Musk predicted that thousands of Optimus robots would be working on Tesla’s production lines by the end of 2025 [11], but to date they appear to be still in development.
I would expect Tesla’s engineers to overcome the technological challenges in time, but I would also question how much demand there might be for these. Robots are already commonplace in industries such as car making: why would a firm pay more for a C3PO when they already have an R2D2 that can do the job?
Finally, even if there is a market for mass produced humanoid robots, Tesla is likely to face stiff competition from Chinese firms such as Huawei which are developing their own humanoid robots. While Tesla may have an advantage in its access to US AI models and chips, Chinese firms are already well established in the manufacture of industrial robots [12], and most of the sensors and other parts required for robots are produced in China, giving Chinese robot makers a cost advantage [13].
To my mind, the valuation of Tesla is unjustified. Even if it does develop self-driving cars and humanoid robots, there is no guarantee it will get there first, and even if it does, it is likely to face the stiff competition from Chinese firms, just as its EVs already face. This is not to say it won’t be a profitable company with an exciting future, it’s just I believe that future is over-valued by the market.
I would make the same point for SpaceX. At the heart of this is an innovative and successful space business, which carries almost 90% of everything that goes into space, and with 10m customers of its Starlink satellite communications service [14]. Being the leader in space launch and satellite communications by some distance, it does not face the same competition that Tesla faces.
However, the profitable space business has been merged in with an AI venture which requires bucketloads of capital investment, as well as a social media platform that creates legal and reputational risks. While SpaceX made an operating profit before depreciation and amortisation of $8bn on sales of $15-16bn [15], xAI lost $6.4bn as capital expenditure rose to $20bn [14]. Overall, the combined entity is loss making, and is expected to continue to burn through an average of $84bn a year in external capital until 2035 [16].
Such prodigious capital requirements are due to Musk’s goal of building orbital data centres (ODCs), as well as funding wider space exploration. If successful with ODCs, SpaceX would be well positioned to meet the ever growing compute needs of AI, and thus to take a significant chunk of fast growing AI spending. However, there are a lot of technical challenges to making ODCs cost-effective compared to their earth-bound competitors. SpaceX’s new Starship rocket needs to work, and this and other innovations may need to get launch costs down by 90% or so [17]. Even with Musk’s track record of leading cutting edge engineering, this is a tall order.
SpaceX’s IPO valuation implicitly assumed that SpaceX can carry this off, and that it will get a significant slice of snowballing AI revenues. Not having any profits, its IPO valuation of $1.75bn amounted to more than 90 times its 2025 revenue [14]. By contrast, OpenAI and Anthropic have been valued at 40 and 20 times current annualised revenue respectively, while Google with its Gemini model is valued at nine times revenue [15].
To my mind the IPO grossly over-valued SpaceX given the challenges and risks involved in its business plan. However, this didn’t deter investors. Having issued $75bn worth of stock at a share price $135, and with banks associated with the IPO buying another $10bn or so [18], SpaceX’s share price soared to over US$200, before falling back to $146 [19]. No doubt the Musk brand excited retail investors, while passive funds have had to follow suit if they track Nasdaq and other indices which included SpaceX (somewhat prematurely, in my opinion).
Nonetheless, I believe SpaceX investors are in for a fall. A study of IPOs from 1980-2024 found that the average IPO underperformed the broader market by 20% over the following three years, while IPOs valued at more than 40x revenue underperformed by 58% [20]. With an IPO valuation of 90x revenue, I wouldn’t be surprised if SpaceX’s share price actually fell in the coming years, particularly if there are setbacks with Starship or the development of ODCs.
Worse, SpaceX could face a funding crisis. Not content with the $85bn+ it raised from the IPO, a fortnight later it issued a further $25bn in bonds [21], but looking forward, it will need to continue issuing shares and borrowing more to fund its voracious capital expenditure [16]. There is a risk that shareholders and/or lenders may be unprepared to fund further investment. In such case, SpaceX would have to scale back plans which could lead to a loss of investor confidence in the dream of cornering AI spend with ODC, triggering further share price falls. In extremis, if lenders refuse to roll over existing debts, SpaceX may need to be re-structured with shareholders likely to take a significant hit.
In summary, in my opinion, both Tesla and SpaceX are grossly over-valued, in part due to Musk’s past record of success. The more inflated expectations are, the greater the risk of disappointment. In Tesla’s case, this is likely to come from stiff competition, particularly from China. For SpaceX, it may be due to the technical challenges of ODCs and/or a loss of appetite from investors to continue funding the massive investment required for these.
In either case, there is a risk that Musk may lose his aura with the investors in both companies, casting doubts on their business models. This could trigger a sharp fall in the value of both companies as they are rated more in line with more earthbound peers. Worse, this could spill over into wider disillusionment with AI and other technology stocks, triggering market falls and cuts in AI expenditure triggering a downturn in wider investment and economic growth.
If Musk is seen as an emperor with no clothes, then it may be a case of “apres moi, la deluge”.
[1] Tesla Q4 and FY 2025 Update, 28th January 2026 - see 2025 Q4 Quarterly Update Deck
[2] Form 10-Q – see tsla-20260630-gen.pdf
[3] 314.18 at 17th August 2026 sourced from Tesla: current P/E Ratio; note the price : revenue multiple is c.16x – see comparison with the SpaceX valuation in [14] below.
[4] 62% in 2024 - Visualizing Chinese EV Market Share Overseas
[5] Optimus (robot) - Wikipedia
[6] The self-driving taxi revolution begins at last, Economist, 24th November 2025
[7] Tesla has 42 robotaxis in Texas. Waymo has 577. The gap is now public record., Karan Singh, Not a Tesla app, May 29th 2026
[8] See for instance, “Paint it black”, Business Insider, 1st July 2026 as well as the Legal Proceedings details (specifically Benavides v. Tesla Inc.) in section 11 of the Q2 2026 SEC filing in [2] above.
[9] Why China is pulling ahead in the robotaxi race, Economist, 26th November 2025
[10] Can China dominate AI exports, too?, Economist, 23rd July 2026
[11] Tesla Optimus units line up in Fremont's pilot production line, TeslaRati, 23rd April 2025
[12] China's industrial robot exports rise 18.6% in first half of 2026, ECNS, 17th July 2026
[13] Watch out, Elon Musk. Chinese robots are coming, Economist, 24th April 2025
[14] Elon Musk is going all-in on an unproven technology, Economist, 21st May 2026
[15] Altman, Amodei and Musk fight dirty for the biggest prize in business, Economist, 12th March 2026 – note Starlink contributed $4.4bn of this (see [14] above).
[16] Elon Musk and the age of the corporate leviathan, Schumpeter, Economist, 7th August 2026 citing a Morgan Stanley report.
[17] Does SpaceX’s plan for a data centre in space add up?, Economist, 22nd July 2026 – citing Bain estimates that current launch costs are c.$600/kg for SpaceX but that this may need to fall to $50-100/kg to be competitive with terrestrial data centres. For more details on the viability of the ODCs, see also: Data centres in space: less crazy than you think, Economist, 2nd March 2026.
[18] SpaceX IPO raised $10bn more than thought, BBC, 15th June 2026
[19] SPCX $146.23 — SpaceX Share Price
[20] Can the stockmarket swallow SpaceX, Anthropic and OpenAI? 1st June 2026, citing a study by Jay Ritter of the University of Florida.
[21] SpaceX - SpaceX Announces Pricing of $25 Billion Inaugural Bond Issuance
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