Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Thursday.
Today is Thursday, August 6th.
SpaceX reported earnings this week, and I want to share three reasons why — after looking at these numbers — a SpaceX-Tesla merger might actually be a pretty good idea.
A year ago I would have laughed at that suggestion.
First, the Earnings
Revenue came in at $7.8 billion — up 92% from $4.1 billion a year ago.
Strong results.
The quarterly loss was $541 million, an improvement of $467 million.
And EBITDA hit $3.5 billion, up 191%.
Starlink stole the show.
The user base is growing — millions and millions of new subscribers added.
The one concern is that average revenue per user dropped from the mid-eighties to the sixties per month.
That tells you they're going into a wider, lower-income market.
More customers, but charging less per customer.
Worth watching.
The stock sold off despite the results.
Same reason the Mag Seven have been selling off.
Capital spending.
SpaceX guided for $18.4 billion in CapEx for the quarter.
Of that, $15.8 billion is for AI compute.
Only about $3 billion is for the actual rocket business.
Let that sink in.
SpaceX is spending more than five times as much on AI infrastructure as it is on rockets.
That tells you everything about where this company is going.
Reason One: They're Doing the Same Thing
Remember your Marcus Aurelius.
What is the nature of the thing?
At root, both Tesla and SpaceX are doing the same thing.
They are moving complex machines — and their goal is to move them automatically.
Robot cars.
Robot rockets.
Optimus humanoid robots.
Self-driving taxis.
Flying rockets that launch, come back, and land themselves.
It's all the same fundamental mission: move things autonomously.
And all of it requires the same infrastructure.
Chips.
Data centers.
Electricity.
A combined company could share that infrastructure instead of building it twice.
And here's something worth understanding about all of that infrastructure.
Every chip SpaceX builds for its AI compute.
Every chip Tesla uses for its robo-taxis and Optimus robots.
Whether they merge or stay separate - every single one of those chips is built on the same blueprint.
One quiet company owns that blueprint.
It doesn't matter how this story ends.
Because they collect the royalty either way.
If you haven't seen the full presentation on exactly who that company is and why I think it's one of the most important Ai infrastructure investments of this decade, now is a good time.
For a little while longer, it's available here.
Reason Two: They Already Operate Like One Company
The second reason — and arguably the most important for investors — is that these companies are already deeply intertwined.
Musk moves engineers and executives between them freely.
They share technology.
Grok's AI models, developed inside SpaceX's xAI division, are already available to Tesla drivers in their cars.
A merger would resolve something that's creating real risk right now.
When the same person runs both companies and moves resources between them, Tesla shareholders have every right to ask: are the deals between these two companies fair to us?
That's a legitimate concern.
And plaintiff lawyers around the world are looking for exactly that kind of thing.
A merger eliminates the conflict.
It puts both sets of shareholders on the same team.
Reason Three: Valuation
SpaceX has dropped about 20-24% from its IPO price.
That brings its market cap to roughly $1.5 trillion.
Tesla is sitting at about $1.3 trillion.
Think about that.
These two companies are now trading at similar market caps.
SpaceX at 190 times forward earnings.
Tesla at about 167 times.
According to S&P Global Market Intelligence, they're trading at broadly similar valuation multiples.
A year ago, when SpaceX was trading at the stratospheric prices it hit on its first day, a merger would have been nearly impossible to structure.
Now you're essentially looking at a merger of equals.
That makes the math much easier.
One More Thing
There was a report last week that Musk was looking at offloading Tesla's China operations.
He vehemently denied it.
Called it fake news.
But I'll tell you this.
Friends of mine who are pretty well sourced tell me he has sounded people out on the idea.
I don't have that firsthand.
But I have it on pretty good secondhand information.
Here's why it matters.
You cannot sell cars in China and hold US government military contracts at the same time.
The sensitivity there is enormous.
If the US and China ever got into a real conflict, he'd have to dump that China business anyway.
Better to do it on your own terms.
Maybe he's saying it's fake news because he wasn't formally selling — he was just feeling people out.
We shall see.
The Bottom Line
SpaceX earnings were pretty good.
But like Meta, like the other hyperscalers, the market is asking the same question.
Where's the return on this enormous capital spend?
Elon is essentially saying what Zuckerberg has been saying.
“Trust me.”
The believers will keep believing.
And honestly, given what I've seen from both companies over the years, I understand why.
But while everyone’s worried about whether SpaceX and Tesla will merge, we're focusing on the one company that gets paid either way — the blueprint behind every chip both companies build. Get the ticker here>>>
Have a wonderful day.
I'll see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine