Elon Musk's house of cards is crumbling: The 1.8 trillion illusion – Why the bubble around Tesla and SpaceX is now bursting

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Published on: August 1, 2026 / Updated on: August 1, 2026 – Author: Konrad Wolfenstein

Elon Musk's house of cards is crumbling: The 1.8 trillion illusion – Why the bubble around Tesla and SpaceX is now bursting

Elon Musk's house of cards is crumbling: The 1.8 trillion illusion – Why the Tesla and SpaceX bubble is now bursting – Image: Xpert.Digital

From hype to crash: Why SpaceX and Tesla are plummeting dramatically on the stock market

Moon colonies and AI fantasies: The absurd plans behind the SpaceX IPO

Debt, price wars, empty promises: The bitter awakening for Elon Musk

Moon colonies, asteroid mining, and robots designed to revolutionize everyday life: Elon Musk has mastered the art of transforming gigantic visions into astronomical stock market valuations like no other. But the spectacular era of boundless growth appears to be over for now, and reality is catching up with the tech billionaire with full force. Following a historic—and, according to experts, grossly overvalued—IPO of SpaceX, the aerospace company's shares are plummeting. At the same time, Tesla's electric car business is struggling under intense price wars, declining margins, and unfulfilled technological promises. The following article analyzes in detail how ambitious future projects became a dangerous speculative bubble, why the hard business facts of SpaceX and Tesla are increasingly setting off alarm bells for investors, and what far-reaching consequences this crash could have for the entire AI and tech sector.

The Tesla-SpaceX bubble is bursting: When billions are built on fantasy instead of facts

It's about money, a lot of money – and about how long valuations that defy all business logic can be sustained. SpaceX raised $85 billion in its IPO, but since then, its share price has fallen significantly, and analysts estimate it will be years before the company actually becomes profitable.

It happened as it had to. After a spectacular start and rapid, above-average share price increases, Elon Musk's space company SpaceX has also come crashing back down to earth. The initial gains couldn't be sustained, and the stock temporarily approached its IPO price again. There are several interconnected reasons for this.

The euphoria and the sudden fall

SpaceX's stock had climbed to $225 after what was then the largest IPO in history—a spectacular debut that was also entirely expected. But then came the price crash to $147. June 22nd was a pivotal day, when the stock lost 16 percent in a single day. Around $600 billion in market capitalization was wiped out that day, a result of several unfavorable events occurring simultaneously.

Debt as a warning signal for investors

The reason for SpaceX's biggest daily loss to date was the company itself. After raising $85 billion in its IPO, SpaceX announced plans to issue $25 billion in bonds, which has since been completed, albeit at demanding terms. For the ten-year bonds alone, SpaceX had to offer 1.4 percentage points more interest than for ten-year US Treasury bonds, as investors demand substantial compensation for risk. This risk premium is unlikely to decrease significantly in the foreseeable future, especially if interest rates in the US are also set to rise.

In SpaceX's case, many factors come together: the company's hard figures, market sentiment, emotions, and inflated expectations. Leaving aside any hindsight bias in light of the waning IPO euphoria, it's worthwhile to look at the cold, hard facts.

An assessment without any connection to reality

SpaceX went public with a valuation of nearly $1.8 trillion. But what for, exactly? With roughly $19 billion in revenue, the most recent annual report showed a loss of almost $5 billion. Skepticism is growing in light of the enormous investments in space technology and artificial intelligence, as well as the almost unimaginable capital requirements, and this skepticism is not unfounded: Analysts estimate that SpaceX will not turn a profit before 2030.

Wanting to be there at any cost

Many investors subscribed to the stock anyway, simply to "be in" and take quick profits, because it was clear that the banks involved in the IPO wouldn't let the largest IPO in history fail. Numerous investors did indeed profit handsomely from the IPO; they simply had to sell at the right time.

This is fundamentally legitimate. However, the fact that many private investors were also involved makes it problematic. While barely five percent of all SpaceX shares came onto the market, when numerous investors simultaneously try to take their profits and sell their shares, an undesirable selling dynamic arises, putting additional pressure on the share price.

Patience pays off in IPOs

There's a good reason why the rule of thumb is to wait around six weeks after an IPO. During this time, the share price stabilizes, the initial hype dissipates, the valuation adjusts to reality, and expectations become more realistic. By now, many investors are likely at a loss on their SpaceX investments.

Future possibilities are already priced in

It is true that the stock market generally trades on future expectations, and SpaceX's vision is grand and understandable. However, much of this future potential is already priced into current valuations, leaving little room for further upward movement. Only when the company proves its strategy works, when growth materializes and profits emerge, will further share price increases be justified; not before.

The selling pressure from insiders is still to come

Profits are not in sight for SpaceX in the foreseeable future, a fact the company communicated transparently even before its IPO, ensuring all stakeholders were aware of the implications. Now, investors need to keep a close eye on certain deadlines, as lock-up periods imposed on existing shareholders after the IPO are about to expire. This means that starting in mid-August, more SpaceX shares will be released onto the market, potentially putting further downward pressure on the share price.

Index providers between rule-breaking and caution

It is also concerning that some index providers are including SpaceX shares in their indices ahead of schedule using so-called fast-entry rules. MSCI has already done so, and Nasdaq followed shortly after with the Nasdaq 100, even though a three-month waiting period was previously standard. SpaceX has only a small weighting in the broadly diversified MSCI World index, but the situation is different in the Nasdaq 100. Nevertheless, index providers are obligated to buy the shares, and at prices that are by no means favorable, although these purchases by major market participants likely provided some temporary support to the share price.

One provider is not taking this step: S&P continues to insist that companies must be profitable to be included in the S&P 500.

Greed, strategy, and the next candidates

The IPO was, once again, a lesson in greed and strategy. Investors now have the opportunity to do better with the upcoming IPOs of AI companies Anthropic and OpenAI, the developers of the chatbots Claude and ChatGPT. Both aim to go public with a valuation of around one trillion US dollars each, but artificial intelligence is not a one-way street to the top. Currently, skepticism prevails among investors, and even those who have fueled the boom for the past three years are increasingly questioning whether the enormous investments will ever pay off.

When every hype fizzles out

The SpaceX example may now dampen the IPO euphoria in the AI and technology sector somewhat, and a bit more realism when looking to the future certainly wouldn't hurt. Fundamentally, every overreaction eventually deflates, as can currently be observed with AI and technology stocks, cryptocurrencies, the defense sector, and precious metals.

Two car companies declare themselves AI corporations

Shares of the former electric car company Tesla and the aerospace firm SpaceX are now plummeting in value. Originally known for electric cars and space travel, the companies were rebranded as AI firms by their CEO Elon Musk in recent years to capitalize on the general investment bubble surrounding artificial intelligence. In doing so, their respective core businesses were neglected, and product development was completely subordinated to Musk's vision. Now, the consequences of this strategy are becoming apparent.

Electric car sales without profit despite oil crisis

The once world-leading electric car manufacturer was unable to generate a profit from its electric vehicle sales despite the closure of the Strait of Hormuz and rising gasoline prices worldwide. This led to considerable disappointment following the shareholder conference for the second quarter of 2026. Despite selling 480,000 vehicles during the worst oil crisis since the 1970s, profits fell short of investor expectations, and the share price dropped from over $380 to below $310.

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Tesla and SpaceX: Why their billion-dollar valuations are faltering

Price wars for outdated models

The company had to offer substantial discounts and zero-interest financing just to keep selling the now-outdated Model 3 and Model Y. As a result, and due to excessively high operating costs, Tesla lost over a billion US dollars in cash flow during the quarter in question, despite strong sales figures. The luxury Model S and X, which together with the Model 3 and Y were once intended to form the S3XY moniker, were discontinued. The Cybertruck became a historic flop in the automotive industry and is now frequently compared to the 1958 Ford Edsel.

A catalog of broken promises

The third version of the stationary Megapack battery storage system has been postponed until 2027. Delays, such as the postponement of the Tesla Semitruck to next year or the introduction of a full self-driving system for Autopilot, have long since become a recurring ritual. The Roadster has meanwhile become an almost mythical figure. The robotaxi is being sent into production without a finished Autopilot system, which, to put it mildly, must be described as a significant business risk.

The Optimus robot, now supposedly a core component of Tesla's business, is not a commercially viable product. Without remote control, it still performs very little, and even with remote control, it offers nothing that would justify mass production. The long-touted plans to sell 20 million cars annually have long since been abandoned.

Tesla lives off other people's share price gains

A large portion of Tesla's quarterly profits also stemmed from gains in the share price of SpaceX, which Tesla owns. However, since June 30, SpaceX stock has drastically lost value. Issued at a nominal value of $135, it initially traded at around $160. On the same day, it rose to approximately $180 and in the following days reached a peak of around $220. It has since fallen to around $112 and continues to decline.

A technological prestige project without payload

Starship is becoming an increasingly problematic aspect of SpaceX's business, not least because the simple abort of a test launch on July 16 triggered a noticeable drop in the share price. The development effort is enormous. At the beginning of July, it was announced that SpaceX had completed its 1,000th Merlin-1D engine for the first stage of its Falcon 9 rockets. This brings the total number of first stages built to over 100 for the Falcon 9 and Falcon Heavy, which have since completed 675 missions powered by an additional 675 Merlin vacuum engines.

At the unveiling of the Raptor 3 engine, the last Raptor 2 engine bore serial number 569. Over 50 Raptor 1 engines were manufactured, and the serial numbers of the Raptor 3 are now approaching 200. With over 800 engines built, not a single payload has yet been launched into orbit, even though these engines, with their higher efficiency and three times the thrust per flight, could theoretically carry almost four times the payload. Had SpaceX instead continued developing a partially reusable rocket like the Falcon 9 with Raptor engines, hundreds of flights with 70 to 100 tons of payload would have been possible long ago.

The impending sales pressure on the workforce

Starting August 6th, SpaceX employees will be allowed to sell their first share packages on the market. It is expected that the resulting supply will exceed demand, putting further downward pressure on the share price. It is therefore no surprise that calls for a merger between Tesla and SpaceX are growing ever more vehement, as long as the SpaceX stock, which is grotesquely overvalued by objective criteria, still commands significant prices.

A price in the style of a landed gentry

Unusually, Elon Musk himself set the issue price of SpaceX shares. Normally, the banks involved in the IPO determine the price. However, these banks earn their money through a small percentage of the sale price of the shares placed. This creates a bias and makes them inclined to agree to an inflated valuation, which was clearly the case with the estimated $1.8 trillion.

An assessment that contradicts every key figure

This valuation was apparently chosen so that Elon Musk, through his company shares, briefly became the world's first trillionaire on paper. It also represented one hundred times SpaceX's approximately $18 billion in revenue, coupled with a loss of around $5 billion. Stocks are usually valued according to their price-to-earnings ratio, with a ratio above 20 already indicating significant overvaluation. A price-to-sales ratio of 100, combined with substantial losses of around 25 percent of revenue, defies description.

Typically, stocks are only included in stock indices after a year of trading history and a year of proven profitability. However, Nasdaq made an exception for SpaceX, adding the stock to the index after just two weeks and despite significant losses, thus forcing all index funds that track the price of all Nasdaq-listed stocks to buy it. The SpaceX share price continued to fall nonetheless.

The crucial question, therefore, is not how SpaceX makes its money today, but how the company intends to justify its market capitalization in the future. The prospectus provides some insightful answers to this question.

Business plans between lunar colony and cyberpunk

According to its prospectus, SpaceX's current growth strategy, in addition to expanding its payload capacity in space travel and the Starlink network, primarily focuses on building a so-called lunar economy with cargo transport, energy supply, and industrial manufacturing on the moon. Plans also include further monetization of artificial intelligence and the former Twitter platform X, as well as expanding its terrestrial AI infrastructure and its own chip manufacturing. Business growth is also to be secured through orbital AI and so-called digital human augmentation, a concept also pursued by Musk's company Neuralink and likely familiar to readers of cyberpunk novels.

These are merely the business areas in which SpaceX aims to achieve short-term growth. To justify its current stock market valuation, significant growth in purely future-oriented markets would also be necessary.

When space tourism becomes a core strategy

SpaceX's future markets include terrestrial point-to-point transportation, specifically passenger flights with the Starship, which has exploded in almost half of all test flights so far. Other areas include space tourism and industrial manufacturing in orbit, presumably initially referring to Earth's orbit.

The list continues with passenger and cargo transport, energy production, and, once again, industrial manufacturing on the Moon and Mars. This is essentially a repetition, and it remains unclear why the discussion doesn't simply refer to extending the growth strategy to Mars. Finally, asteroid mining is also included.

Astronomical market estimates as justification

SpaceX estimates the potential global revenue for space travel and space transportation at $370 billion. According to their figures, Starlink is expected to address a $670 billion annual market, another $740 billion market is projected for mobile communications, and a further $200 billion is expected to come from business and government contracts. In addition, they anticipate a market of $26.5 trillion in the field of artificial intelligence.

Space travel has thus become a similarly negligible side aspect in SpaceX's self-description of its business as the car business is for Tesla. The prospectus doesn't even address the initially stated goal of extending the light of consciousness to the stars.

A quarter of the global economy as a target

The total market that SpaceX aims to serve currently represents roughly a quarter of global GDP. Naturally, no reliable figures exist regarding Earth's trade relations with the Moon, Mars, or any colonies in the asteroid belt, nor regarding their economic situation. The crucial question of potential tariffs on trade with the United States, where SpaceX is headquartered, also remains unanswered.

The valuation of Tesla and SpaceX is no longer based on electric car sales or traditional space travel, but rather on expectations surrounding artificial intelligence and future markets. These topics have so far been discussed far more in science fiction novels than in business magazines, without the actual reality having changed to a comparable extent. This very discrepancy between management's expectations and objective economic reality now appears to be increasingly reflected in falling share prices.

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