It's time to stay away from Musk-affiliated publicly listed companies.
The market trend has completely shifted.
A new strategy called "Elon Musk Exclusion" has emerged on Wall Street.
Subversive has blazed a trail by filing applications to launch two ETF funds, which track the Nasdaq 100 Index and the S&P 500 Index respectively, while actively excluding companies founded, controlled, led by, or closely related to Elon Musk.
The underlying trading logic behind this is that the market value of Musk-affiliated companies is undergoing a brutal "de-bubbling" process.
SpaceX, which just went public not long ago, has seen its stock price pull back by more than 50% from its peak, and the evaporated market value is equivalent to the entire market capitalization of Tesla. Tesla itself has not fared much better, with its price plummeting 30% across the whole month of July.
Why is the "Iron Man" who was once deified by capital no longer favored? The valuation logic built on distant empty promises is facing challenges.
In the past, the high valuations of Musk's companies relied heavily on "story-driven catalysts" rather than "performance delivery". The core manifestation is that long-term businesses with huge investment account for the majority of the current market value, but these businesses barely contribute any profits at the moment.
In the period of rampant FOMO sentiment and market euphoria, capital is willing to pay for the "big-picture vision". The more you invest, the more the market believes you have a promising future.
But now, the trend has changed. When the free cash flow of tech giants turns negative, if huge investment cannot bring tangible returns, they will be punished by the market.
Yet Musk's success is attributed to his courage to take risks. His radical personal character, coupled with the current business stage of Tesla and SpaceX, doomed that he cannot stop, and will only choose to continue to "bet the present" on the future.
In the second quarter, SpaceX's capital expenditure reached 18.369 billion US dollars, a 5.5-fold year-on-year increase, and the investment scale is twice as high as its revenue. Tesla's capital expenditure surged 142% year-on-year, and its free cash flow turned negative for the first time after its listing.
When the extremely risk-taking personal character meets the extremely cautious market style, Musk-affiliated companies will most likely face a downward valuation adjustment.
01
From "Valuation Based on Future Prospects" to "Valuation Based on Delivery Speed"
Performance "beating expectations" has always been the hard currency to drive up stock prices, but it has not worked for Musk.
In the second quarter, almost all core indicators of SpaceX achieved higher-than-expected growth.
On the revenue side, SpaceX's total revenue reached 7.8 billion US dollars, exceeding the market expectation of about 6.9 billion US dollars, with a year-on-year revenue growth of 92%, a sharp acceleration compared with Q1 (about +15%). On the profit side, SpaceX's operating profit was -140 million US dollars, far better than the market expectation of -1.68 billion US dollars. The operating margin increased by 40 percentage points month-on-month to -1.8% (it was -41.4% in Q1).
Both revenue and profit beat expectations, but SpaceX's price dropped instead of rising, plummeting 13.61% on the first trading day after the financial report was released.
Tesla followed a similar pattern. In the second quarter, Tesla's revenue was 28.2 billion US dollars, up 25.5% year-on-year, slightly exceeding market expectations. It delivered 480,000 vehicles globally, hitting the highest record for a second quarter. However, on the first trading day after the financial report, its price plunged by nearly 15%.
It is the huge capital expenditure that dragged down the stock prices of both companies.
In the second quarter, SpaceX's capital expenditure soared to 18.369 billion US dollars, a 5.5-fold year-on-year surge, and the expenditure scale is exactly twice the current revenue! Musk showed no sign of holding back: "This rate of cash burn will only go up in the next few quarters."
Tesla is also losing cash, with capital expenditure surging 142% year-on-year, which directly led to its free cash flow turning negative for the first time since its listing.
The fact that stock prices are dragged down by expenditures reflects the shift of the market's valuation logic: in the past, Wall Street was willing to pay for Musk's "stars and seas" and give premium based on "unlimited future"; but now it starts to focus on "delivery speed" and reprice Musk's dreams.
In terms of delivery speed, Musk's "stars and seas" vision is still far from being realized.
Take Tesla, whose commercialization is relatively mature, as an example. Its capital expenditure is aimed at seizing the future autonomous driving and robotics market. However, the returns of these two businesses are not enough to fully match the explosive growth rate of capital expenditure.
For autonomous driving, about 700,000 miles of new paid mileage was added in the second quarter, down about 36% from the first quarter. Previously, the Robotaxi narrative was that it would achieve explosive self-reinforcing growth relying on fleets, data and operational scale. But the Q2 operational data shows that the story is not being delivered at the expected pace.
As for the robotics business, Musk laid his cards on the table directly: the output in the early stage will be very slow.
SpaceX's investment is also unlikely to generate high returns in the short term. Its vision is to become the "Earth Infrastructure" integrating "space transportation + global communication + artificial intelligence", among which the most imaginative part is building space computing power for AI, for which it invests 70% of its expenditure in AI infrastructure.
However, it is difficult for computing power orders to achieve explosive growth in the short term. SpaceX has already obtained large orders from Anthropic and Google, and the short-term marginal increment is limited. What's more, once the AI development falls short of expectations, customers can cancel the order contract 90 days in advance.
When the market cannot see returns from Musk that match his high investment, it starts to vote with its feet.
02
The Market Has Changed: Huge Investment Is No Longer Rewarded But Punished
The decline in valuations of Musk-affiliated listed companies is essentially caused by the shift in the market's investment style: huge capital expenditure has changed from a rewarded factor to a punished factor.
Over the past two years, the market rewarded companies that "spent the most on AI". Under the initial FOMO sentiment, every 1 US dollar spent could drive a 2 US dollar increase in market value. The market did not focus on temporary returns and profits, as long as you invested, it meant you had potential.
But as hundreds of billions of US dollars of capital expenditure have been poured in and the free cash flow of giants has turned negative, the market's investment logic has become cautious: investment is acceptable, but the returns of the investment must be visible.
This is clearly reflected in this earnings season:
When tech giants announce higher-than-expected capital expenditure, but fail to deliver matching growth in revenue or order volume, the market will begin to question the ROI of capital expenditure. A typical example is Meta: its capital expenditure doubled in the second quarter, but its revenue only increased by 28%, and its stock price fell 7% on the first trading day after the financial report was released.
After Amazon and Microsoft released their financial reports, their stock prices rose by 15.5% and 9.5% in a single day respectively. The core reason is that the two companies have voluntarily downplayed unnecessary investment in large model involution, and the returns of AI investment have started to be delivered on the cloud: total revenue, profit margin and backlogged orders are all rising synchronously, indicating that the early capital expenditure is accelerating to translate into current revenue, operating profit and visibility of future revenue.
In contrast, Musk-affiliated listed companies can neither cut their investment nor obtain high returns matching the investment in the short term.
The reason why they dare not cut investment is that the high valuations of Musk's listed companies rely heavily on "story-driven catalysts" rather than "performance delivery". The core manifestation is that long-term businesses account for the majority of the current market value, but these businesses barely contribute any profits at the moment.
Taking Tesla as an example, its current market value of 1.3 trillion US dollars has exceeded the total market value of the world's 2nd to 9th largest listed auto companies. However, its sales volume is only 1/6 of that of Toyota. Obviously, the market does not value Tesla as a manufacturing company, but as a tech stock.
SpaceX's valuation relies even more heavily on long-term businesses. Its peak market value has exceeded 2.7 trillion US dollars, which is not only 142 times its current revenue, but also exceeds the total market size of the Starlink and aerospace industries combined.
The high expectations that push up the market value can be explained by SpaceX's prospectus: its TAM (Total Addressable Market) measurement shows that the total market space reaches 28.5 trillion US dollars, of which the vast majority, 26.5 trillion US dollars, is supported by AI.
This grand industrial narrative for capital goes like this: after 2030, SpaceX's annual increment of space computing power will be equivalent to directly building two or three "the sum of global cloud computing" in space, completely breaking the development limits of ground data centers in terms of energy and land.
Is space computing power really necessary for large-scale deployment and commercially feasible? No matter you believe it or not, SpaceX has to believe it. For the sake of high valuation, it must invest in this direction. As for the returns, as analyzed above, the short-term marginal increment is small and cannot match the current high investment.
This has created the valuation bottleneck for Musk: his companies are highly dependent on long-term businesses, whose credibility is not very certain. In a cautious market environment, their valuations will most likely go down.
03
At Least For Now, It Is Advisable to Stay Away From Musk
At the end of the discussion, there is an ultimate question that cannot be avoided: what exactly are people buying when they purchase shares of SpaceX and Tesla?
To a large extent, they are buying Elon Musk himself: the corporate governance of his companies is highly tied to Musk. The valuation ostensibly relies on the unprovable AI / space long-term narrative decades later, but essentially relies on Musk's personal charm and idol aura. Believers think that what they buy is part of "Musk's genius".
Betting on Musk has obvious returns and risks.
Musk is a top industrial adventurer who believes in the first principle, with a broad vision. This makes him the gateway to the future world, the person closest to electric vehicles, artificial intelligence, brain-computer interface, Mars colonization and global satellite internet. His companies have also enjoyed the "dream-driven valuation" thanks to Musk's forward-looking vision.
However, Musk's success is largely attributed to his courage to take risks, which is a double-edged sword.
Charlie Munger's comment on Musk is full of dialectical thinking. He emphasized that Musk's success is largely attributed to his courage to take risks, and this "craziness" allows him to keep moving forward even on the verge of collapse. But Musk is overly confident, and to run a company, one must stay rational.
Walter Isaacson, the author of *Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future*, attributed Tesla's previous crises to Musk's radical work style when recording them.
Now, Musk's all-in bet on AI has further amplified the uncertainty of his companies.
SpaceX had already achieved profits before investing in AI. In 2024, excluding xAI, SpaceX's annual net profit reached 791 million US dollars, and it continued to generate 5.8 billion US dollars of operating cash inflow from launch contracts and Starlink subscriptions, having already had the ability of self-sustaining.
After integrating AI business in 2025, SpaceX recorded a net loss of 4.94 billion US dollars, and the cash flow engine can no longer cover its capital expenditure. The company has to rely on equity financing, bond issuance and IPO fundraising to survive. The company just raised about 75 billion US dollars through public listing, and then issued 25 billion US dollars of bonds. At present, its cash and equivalents on account are about 100 billion US dollars.
However, according to the calculation of Dolphin Research, such huge capital expenditure combined with low-visibility order volume means that SpaceX may start a new round of large-scale financing by the end of this year or next year. The market is beginning to worry that its financing demand is a "bottomless pit".
This path of "betting on high-risk, high-return long-term grand narratives with massive investment" is very similar to bringing the risks of the primary market to secondary market trading. But retail investors are not price participants in the secondary market, and they have no ability to assess the probability of business delivery in 3-10 years. The rise and fall of stock prices completely depend on the market sentiment's belief in Musk's stories.
The "interstellar civilization" narrative is grand as it is, in a sentimentally cautious market, staying away from Musk may be the right way to respect the market.
This article is from the WeChat official account "Insight Finance", author: Yang Yang, published with authorization from 36Kr.