Musk's empire is being besieged by the market on all sides

On July 29, SpaceX's stock price fell to 107.01 US dollars intraday, down more than 20% from the IPO price of 135 US dollars, and more than 50% from the high of 225.64 US dollars after listing.

According to the peak valuation of about 2.6 trillion US dollars at the beginning of the listing, SpaceX's market value has evaporated by about 1.2 trillion US dollars, which is equivalent to losing an entire Tesla.

On the other hand, the day after Tesla announced its second-quarter earnings report, Tesla's stock price closed down 14.52% to 319.69 US dollars, the biggest one-day decline in more than a year; the company's market capitalization evaporated about US$214.5 billion (approximately RMB 1.5 trillion) in a single day, making it the worst performing constituent stock in the S&P 500 index that day. Up to now, Tesla's stock price has not been repaired and is still about 18% lower than before the earnings report was announced.

If you only look at revenue and delivery data, this financial report isn't bad. In the second quarter, Tesla delivered 480,126 vehicles worldwide, a record high for the same period; revenue reached US$28.24 billion, an increase of 26% over the previous year, which was also higher than market expectations.

But the focus of the market has changed: as investment in AI, Robotaxi, Optimus, and related infrastructure continued to increase, Tesla's second-quarter capital expenditure reached $5.8 billion, and free cash flow turned to -$1.1 billion — the first time in more than two years that the company experienced negative quarterly free cash flow. At the same time, the company maintained a capital expenditure guideline of over $25 billion for the year.

In addition to cash flow, there are two other pieces of information worth paying attention to.

According to the cumulative paid passenger mileage split calculation disclosed in Tesla's earnings report, the Robotaxi team added about 700,000 additional paid operating miles in the second quarter of this year, down from about 1.1 million miles in the first quarter, down about 36% from the previous quarter.

At this quarter's earnings call, Musk said when talking about the Cybercab deployment plan that Tesla will first use Cybercab test vehicles equipped with steering wheels and pedals to accumulate driving data, and then gradually expand the deployment of the steerless version. This shows that although Tesla currently has about 10 million vehicles on the road continuously collecting real road data, Cybercab, as a new vehicle platform, cannot directly rely on data from existing models; it still needs to complete data accumulation and verification for its own platform.

The capital market is willing to give Tesla a much higher valuation than traditional car companies. It is largely not about how many cars it has sold, but rather believes that Robotaxi and Optimus can bring about the next stage of growth. Among them, one of Robotaxi's most important logics is that Tesla can continuously collect real road data based on close proximity to 10 million cars, continuously enhance autonomous driving capabilities, and eventually form a continuously self-reinforcing data flywheel.

However, the problem revealed this time made the market begin to doubt: to what extent can Tesla's long-emphasized data flywheel support the future of Robotaxi?

Robotaxi has always been one of the most important stories in Tesla's valuation system.

The story is based on a very simple logic: Tesla has the largest fleet of smart cars in the world.

As of the second quarter of this year, the company has about 10 million cars continuously operating on global roads, and there are close to 1.5 million paid FSD (Full Self-Driving) users worldwide. Every day, large amounts of real road data are continuously sent back to train autonomous driving models.

Musk has also emphasized many times that Tesla's real competitive advantage is not lidar or high-precision maps, but rather a fleet that continuously generates real driving data. Once sufficient data is accumulated, FSD capabilities will continue to improve, eventually forming a Robotaxi network, which will attract more vehicles to join and generate more data to form a continuously enhanced data flywheel.

According to this narrative, as real road data continues to increase, Robotaxi should have entered a phase of continuous expansion.

However, according to the cumulative Robotaxi mileage data split disclosed by Tesla, analysts found that about 700,000 new paid miles were added in the second quarter, down about 36% from about 1.1 million miles in the first quarter.

It should be clarified that Tesla's current financial report shows Robotaxi's cumulative paid operating mileage, not quarterly operating data — judging from the chart, the cumulative mileage continues to rise, and the Robotaxi business seems to continue to grow. In other words, the cumulative data conceals changes in the pace of quarterly operations, while the split quarterly data shows a different picture.

Robotaxi has always been described as a business that can rely on fleet, data, and scale of operations to continuously reinforce itself: as cities covered increase, vehicle numbers expand, and paid mileage and real road data should grow accordingly. However, operating data for the second quarter shows that this set of narratives has at least not been steadily implemented at the expected pace.

Meanwhile, during this earnings call, Musk's response added a premise that had not been fully discussed before to this story.

Speaking about the Cybercab deployment plan, he said that Tesla will first use Cybercab test vehicles equipped with steering wheels and pedals to continue to accumulate driving data and complete calibrations for the Cybercab chassis (chassis) before rapidly expanding the deployment of the steerless version.

Although any autonomous driving company needs to complete testing and verification of the new platform when launching a new model, when this judgment falls on Cybercab, it is difficult not to trigger the market to reflect on valuation.

After all, the Cybercab is no ordinary model for Tesla.

When the Cybercab was released in 2024, the positioning given by Tesla was very clear: it had no steering wheel or pedals, and it was a model specially built for fully autonomous driving operations. Musk predicted at the time that Cybercab would sell for less than $30,000 and production would begin in 2026.

More importantly, Cybercab carries Tesla's vision of the final form of Robotaxi. As early as Autonomy Day in 2019, Musk proposed that in the future real Robotaxis will no longer require steering wheels and pedals (“There will not be steering wheels, pedals.”) The vehicle can independently take orders, pick up and drop off passengers, and complete the entire operation process without the participation of a human driver.

In contrast, the Model Y, which currently operates the Robotaxi service in Austin, still retains the steering wheel and pedals, and every car is equipped with safety supervisors. The operating model is still far from the final form Musk envisions.

In other words, the current Model Y Robotaxi is more like verifying the Robotaxi operating system; Cybercab is the core vehicle for Tesla to truly realize the driverless business model.

Because of this, Musk's statement that “Cybercab still needs to re-accumulate exclusive driving data” is particularly noteworthy.

It shows that the real road data Tesla has accumulated in the past ten years does not allow Cybercab to directly skip the verification stage. From Model Y to Cybercab is not a simple software migration. For Tesla, which has always emphasized the “data flywheel,” this means that the data it has accumulated cannot be infinitely or inexpensively replicated to each new platform generation.

For the capital market, this means that Robotaxi's cashout time may continue to be pushed back.

In fact, this isn't the first time the market has waited for Tesla to cash out Robotaxi.

In 2019, Musk said that 1 million Robotaxis will be put into operation by the end of 2020; in the following years, he has repeatedly predicted that Tesla will achieve true driverless driving next year. However, it wasn't until 2025 that Tesla launched a limited range of Robotaxi operations in Austin, USA. Currently, it is still expanding its small-scale fleet in a few cities.

The cake Musk drew was beginning to make people feel that it was hard to fill their hunger.

Robotaxi's slowdown in expansion is only part of Tesla's valuation logic facing a test.

Over the past few years, the reason why Tesla has been able to obtain valuations far higher than traditional car companies for a long time is not only because it can produce and sell electric vehicles; what really opens up room for imagination is the new business represented by Robotaxi, Optimus, and AI capabilities.

These businesses have yet to generate large-scale revenue and profits, but are thought to be likely to reshape transportation, labor, and manufacturing in the future.

Musk has described Robotaxi and Optimus as Tesla's most important future business for years. In 2024, he even said that Optimus is expected to bring Tesla to a value scale of 5 trillion US dollars; the new salary plan announced in 2025 will further include 1 million Robotaxis, 1 million Optimus units, and profit and market capitalization targets as core assessment indicators.

In other words, Tesla's valuation has long been based not only on how many cars are sold today, but also on how large-scale profits these new businesses can eventually generate.

But now, these stories are gradually moving from concept presentation to commercial verification.

Robotaxi has already begun to provide paid services. The market depends not only on whether vehicles can complete driverless driving, but also whether the fleet can continue to expand, whether operating mileage can accelerate, and when this service can generate real revenue and profit.

The test for Optimus is more straightforward.

In 2024, Musk said he hoped more than 1,000 Optimus would complete “useful work” at the Tesla factory by 2025; he then further proposed the goal of producing tens of thousands of Optimus units by 2025. However, as of the second quarter of this year, Optimus was still mainly used for internal training, data collection, and function development.

Tesla said in its latest earnings report that the first-generation Optimus production line is being installed, and official production is expected to begin later this year; Musk also warned that early production will be very slow because many of the robot's 10,000 components will require a redesign of the supply chain.

In other words, what the market can currently see is still mainly action demonstrations, production plans, and long-term production capacity targets. Optimus has not yet reached the commercialization stage where orders, sales prices, and gross margin can be measured.

At the same time, AI has also begun to enter Tesla's ROI management as a production capacity.

According to a previous report by The Information, Tesla will limit the cost of employees using external AI tools to $200 per person per week starting July 6, and additional approval is required for exceeding the quota. The initiative shows that even within the company that emphasizes AI the most, external AI tools are beginning to be incorporated into cost management: usage itself is no longer equal to productivity, and investment needs to explain its return.

Changes in capital market concerns are directly reflected in shareholders' questions.

On Tesla's official investor Q&A platform, the question that received the highest number of votes this quarter directly pointed to why the company failed to implement Robotaxi's short-term guidelines three times in a row. The question received 741 votes, representing about 1.5 million Tesla shares.

Previously, the capital market always valued Musk according to the “future”; now, the market is beginning to re-price Musk's future according to the “speed of cash out.”

It is also in this context that whether Tesla and SpaceX will merge suddenly went from a long-standing idea to one of the most talked about issues during this earnings call.

When asked if the two companies might merge, Musk did not directly deny it. He said that cooperation between Tesla and SpaceX is increasing, but the company's merger is not suitable for discussion on earnings calls and must go through proper procedures. Tesla's general counsel later also referred to SpaceX as Tesla's key partner and said that the two sides already have multiple mutually beneficial deals.

The reasons given by those who support the merger are not difficult to understand: Tesla and SpaceX are currently cooperating in fields such as batteries, manufacturing technology, artificial intelligence infrastructure, and chip factory Terafab. J.P. Morgan believes that the two companies' operational integration is already quite deep. Sharing engineering talent, AI infrastructure, and Musk himself may all create conditions for future mergers. SpaceX President Gwynne Shotwell also said that integrating the companies may help simplify the management of Musk's companies.

But considering the reality, the two companies are in different value cycles. SpaceX's business is more mature and control is more concentrated, while Tesla is a publicly owned listed company with extensive public ownership. If the price of the transaction is biased against either party, shareholders on the other side may think they are paying for Musk's overall strategy.

As to whether the merger can actually be carried out, that is another question — the point is that the discussion itself has sent a signal worth watching: the capital market is beginning to re-examine the value of Musk's other assets and whether these assets can provide more solid support for Tesla's future.

However, the current situation is that several of the core businesses Musk uses to support Tesla's future valuation have not been carried out at the pace previously anticipated by the market.

For a company whose market capitalization has long been based on future expectations, when a business enters the commercialization stage, the market begins to focus on revenue, profit, and cash flow, and is no longer satisfied with technical demonstrations and visions, which is an inevitable process.

The future will eventually have to be realized; this is originally the meaning of the existence of the capital market.

But capital markets also tend to overlook another thing: cashing out itself is the most time-consuming thing.

Looking back at Musk's entrepreneurial history over the past 20 years, the capital market is always overestimating the speed, and Musk is always taking a long time.

In 2017, Tesla fell into the famous “Production Hell (Production Hell)” due to Model 3 mass production, and free cash flow continued to be under pressure. At one point, the market worried about whether the company would need to refinance and even survive. Musk later recalled that Tesla was only a few weeks away from bankruptcy at the time.

Over the next few years, the Berlin Gigafactory and the Texas Gigafactory were built one after another. Tesla's capital investment support continued to be high, and free cash flow also fluctuated markedly. It wasn't until Model 3 and Model Y completed large-scale production and the energy storage business gradually expanded that the company re-entered a stable cash flow stage.

SpaceX's development is the same.

The first three launches of Falcon 1 all failed; Falcon 9 took years of iteration to establish stable reusable capabilities; Starlink gradually became one of SpaceX's most important sources of revenue after continuing to launch thousands of satellites and years of capital investment.

For Musk, this is not the first time that free cash flow has been negative.

Too often, negative free cash flow isn't the end of the story, but rather the most expensive stage before the story is realized.

This is also the most special aspect of Musk's business model: he doesn't tell all the stories at once and then wait for them to be realized at the same time; instead, he continues to use businesses that have already been cashed out to support a future that has not yet been realized.

The capital after the sale of PayPal became the starting point for the establishment of Tesla and SpaceX; the cash flow from the Model 3, Model Y, and energy storage businesses supported the continued investment of Robotaxi and Optimus; and the commercial revenue generated by Falcon Rocket and Starlink also supported the continuous advancement of Starship.

In other words, what Musk has actually established is not an independent project, but a capital model that can continuously circulate itself: use the business that has already been realized to finance the future that has not yet been realized.

Faced with falling SpaceX stock prices and increasing short positions, Musk once again offered his familiar “anti-short” response.

On July 18, he said on X that those institutions that have maintained large-scale short positions with SpaceX for a long time “have a very low chance of survival.”

At the time, SpaceX's stock price had clearly fallen from its high point after listing, and bears had obtained considerable book profits as a result. According to Reuters data, as of late July, the book profit of SpaceX bears was about US$15.5 billion, and about 56% of freely tradable shares were on loan.

This is also Musk's most typical response: when the market begins to focus on short-term cashout, he always tries to bring discussions back to long-term value.

It's not a bad thing that this round of the market re-examines Tesla.

It means that capital markets are beginning to require Musk to prove that the next blueprint he has drawn can actually move into commercial reality, just like those stories in the past.

But at the same time, cashing out is never something that can be done in a quarter or in one financial report.

The capital market always wants the future to arrive as soon as possible, and the real future is often slower than anyone can imagine.

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