All In The Family?

Jim Cramer was asked about Tesla this week.

His answer:

“My only solution to it is that SpaceX has to buy it, period, end of story.”

Then he added:

“But maybe they will.”

That would normally be easy enough to file under Cramer being Cramer.

Except he isn’t the only one thinking about it.

This week, another argument surfaced for eventually putting Elon Musk’s two biggest companies under the same roof — with SpaceX buying Tesla.

And there is at least some logic behind the thought.

Tesla is increasingly betting its future on AI, robotaxis and humanoid robots. SpaceX now spans satellites, rockets and AI compute. Both are controlled by Musk, and both are spending heavily on technologies that are starting to overlap in interesting ways.

There’s just one rather important detail:

→ Musk hasn’t said he’s doing it.

So why does the idea keep coming up?

Why would SpaceX want Tesla in the first place?

Let’s see.⇩

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Earth vs. Space:

So, which Musk company actually has the stronger hand?

For Tesla  TSLA ( ▼ 0.53% ) , the old business is showing life.

→ Automotive revenue climbed 23% last quarter as deliveries jumped 25%.

But increasingly, that’s not where the big expectations are.

→ Tesla is betting on FSD, Cybercab and Optimus — businesses that could push it well beyond selling cars. Musk says Optimus could begin shipping to customers next year, while Cybercab is already moving Tesla further into the robotaxi market.

SpaceX  SPCX ( ▼ 1.36% ) has a different problem.

→ Starlink already works.

It’s growing quickly, generates recurring revenue and could eventually expand further into communications.

The more ambitious pieces are less settled.

✱ Starship still has major technical hurdles to clear before rapid reuse becomes routine. And SpaceX’s fastest-growing business — AI compute — is currently benefiting from something that may not last forever:

There simply isn’t enough compute to go around.

That scarcity has created some extraordinary economics, including a recently signed deal worth $1.1 billion per month.

Let’s see…↓

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The $1.1 Billion Question.

SpaceX’s fastest-growing business is bringing in some serious money.

Its AI segment just signed a deal worth $1.1 billion per month.

That’s a remarkable number.

But there’s an important question hiding underneath it:

How much of that opportunity exists because AI computing power is unusually scarce right now?

Demand for compute has raced ahead of available capacity, creating an opportunity for companies that can get their hands on it.

In other words, the shortage is part of the business model.

More data centers, more chips and more available capacity could gradually make compute easier to find — and harder to sell at today’s economics.

That doesn’t make the revenue any less real.

It just makes the $1.1 billion-a-month question a little more interesting:

Could those economics fade as more capacity comes online?

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Tesla’s $28 Billion Quarter.

Tesla had a strong quarter.

Revenue climbed 26%, deliveries reached 480,126, and energy storage deployments jumped 41%.↓

Then you move a little further down the income statement.

→ Operating income fell 57% to $398 million.
→ Free cash flow came in at negative $1.09 billion.
→ And capital spending doubled to $5.79 billion, as Tesla poured money into AI infrastructure and its next generation of manufacturing.

Tesla is selling more cars, generating more revenue and spending considerably more on what comes next.

! But much of the spending — and much of the excitement around the company’s future — is increasingly tied to businesses that are still being built:

Self-driving cars and robots.

For now, though, very little of that growth is making its way to operating profit.

Not Much Of A Short…

There has been some cooling.

The number of hedge funds in Insider Monkey’s database holding Tesla slipped from 123 to 116 during Q2.

But outright bearish positioning remains relatively small.

Only 2.10% of Tesla’s float was sold short at the end of August.

And among the holders that remain, some positions are substantial. BAMCO held roughly 12.5 million Tesla shares at the end of Q2.

So while Tesla’s margins, spending and future bets are giving investors plenty to argue about…

very few are expressing that skepticism by shorting the stock.

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