Grasping Reality · Economics & Policy
TIER 4 Mon, 4 May 2026 17:09:48 +0000
Tesla is a trillion‑dollar stock priced like a world‑eating tech platform at the exact moment all the bad, boring car‑company things have finally caught up with it. The chip shortage lottery win... ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- --- This is Brad DeLong's Grasping Reality--my attempt to make myself, and all of you out there in SubStackLand, smarter by writing where I have Value Above Replacement and shutting up where I do not… Bitter experience has shown us that a healthy public sphere can only be built on something other than click-baiting and eyeball-gluing advertisements. SubStack is now in there pitching to make things different. I won't command you to become a paying subscriber of this 'Stack: I will command you to become a paying subscriber of some 'Stack(s): Upgrade to paid * * * # Charts of the Day: Tesla ### Tesla is a trillion‑dollar stock priced like a world‑eating tech platform at the exact moment all the bad, boring car‑company things have finally caught up with it. The chip shortage lottery win... | | Brad DeLong --- | May 4 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- ###### Tesla is a trillion‑dollar stock priced like a world‑eating tech platform at the exact moment all the bad, boring car‑company things have finally caught up with it. The chip shortage lottery win is long over. And yet, and yet, and yet… * * * Is Tesla a company that is appropriately valued as worth $1.2T to its shareholders? Share | | ---|---|--- Share DeLong's Grasping Reality: Economy in the 2000s & Before Consider that nearly every single bear-case process and event that you might as of the start of 2022 have worried might happen to Tesla has in fact happened to Tesla. Perhaps the place to start the story is with the post-plague rebound. Auto companies had given up their place in the microchip line as they cut back on production, and so they were blindsided at first when demand for autos roared back in 2021. They could have have responded by changing course, and paying premium prices to those who had taken those places in the chip-distribution line in order to get back their allocations, and so produced more cars. But a light bulb went on in the greedy little minds of all the auto executives: if none of us are willing to pay premium prices to get back our chip allocations, then we have a very nice production limiting cartel, don't we? And we can charge super premium prices, can't we? And so we can rake in the money: profit! And so they did. Except for Tesla. Elon Musk was--to his great credit--willing to do whatever it took to get chips and make cars. And so Tesla's revenue roared. From $80B at the end of 2019 to $1.2T in mid-2021. That turned Elon Musk from the Green Enviro Hero of the Electric Anti-ICE Future into the Man with the Golden Touch, and the richest TechBro in the world. And there the story stopped. Give a gift subscription Over in Gwynne Shotwell's shop, Falcon launches went from 25 in 2020 to 31 in 2021, and then 61, 96, 134, 167, and now 54 in the first four months of 2026. Starlink--a very good business indeed--had 100 satellites at the end of 2019, and has 10,000 today. But, otherwise, _**not a single thing Musk has tried to do since the end of 2021 has actually worked.**_ Tesla's real revenue--not profits, but revenue--peaked in late 2022. Tesla these day is earning $3.5 billion of GAAP profits per year. A company with a revenue growth rate of zero and a P/E of 350 is an extraordinary beast. And yet, it moves... These days Apple, Microsoft, Google make about $100B a year each; Amazon and Facebook make about $50B a year each; add in Tencent, Oracle, IBM, Uber(!!!), Accenture, SalesForce, and Adobe, and you have another $100B. NVIDIA's profits are $125B. TSMC, Samsung, ASML, Cisco, Micron, AM earn another $125B. That's $750B for Tech Giants as a group: 0.6% of total world economic product. However, there is a lot of implicit double counting here. Overwhelmingly, these days at least, the profits of the upstream tech giants are not because the downstream ones are making investments to rapidly grow their profits, but rather because the downstream ones are making extraordinarily large defensive investments to protect their existing tech platform monopoly profits. Figure that the actual profits from the tech giants sector are really about two-thirds of the total: $500B a year, 0.4% of total world economic product. A valuation of $1T for Tesla is based on either (a) belief that the fundamentals will shake out with it having a 10% slice of that $500B a year, or (b) belief that some greater fool will come along, so I can unload my stake before the crash. If it is belief in the fundamentals, it is gonzo that they have not been affected by all the things that have gone wrong since mid-2021: * **Margin compression:** required vehicle price cuts to empty the pipleline. * **Stalling growth:** there is no "hyper‑growth" story any more. * **EV competition:** primarily Chinese firms (BYD, etc.) have flooded key segments with credible, cheaper EVs. * **China exposure:** Over‑reliance on China as a market and a manufacturing base. * **Brand damage from Musk 's behavior:** Musk's public antics have destroyed the "aspirational green" brand. * **Regulatory & liability overhang:** Crashes, investigations, and lawsuits have kept autonomy under a cloud. * **FSD missing timelines:** The promised rapid march has not materialized. * **Robotaxis vaporous:** There is no high‑margin robotaxi network. * **Cybertruck flop:** Cybertruck is not a mass‑market, margin‑expanding hit. * **Product line old & thin:** 3/Y/S/X have aged, and S/X have been dropped. The Fremont line is now supposed to be used for Optimus robots. * **Overcapacity in EV manufacturing:** Aggressive capacity build‑out now looks excessive relative to demand. * **Subsidy & policy:** Backing Trump a huge mistake; enough said. * **Input ‑cost volatility:** Battery‑materials and component costs have been volatile. * **Execution stretch from side projects:** Musk's focus on everything else. * **Governance & key‑man:** Especially as in the absence of a Shotwell at Tesla nobody has the baton to do anything without Musk's focus. * **Multiple ‑compression:** Why shouldn't this have the market cap or a car company? * **Used ‑EV price weakness:** The "Teslas are appreciating assets" and "TCO no‑brainer" rhetorical moves are gone, * **Reputational risk from labor & safety:** Criticism over workplace conditions, union fights, and safety concerns has become a persistent drag. * **Story ‑stock fragility:** It's a narrative‑driven asset vulnerable to sentiment turns. Leave a comment And yet, and yet--there are people who tell me with a straight face that Tesla's capital‑intensive but already‑built manufacturing base, plus a software/AI stack, gives Tesla a unique ability to scale cheap autonomy, storage, and robots into extremely large markets. They are largely silent on whether that vision survives contact with physics, regulators, and competition is another question--but that is the fundamental bull case. If it is purely a "greater fool" story--that somebody will come along who believes in Mars, or the Moon, or FSD built on the core platform of the current Tesla footprint, or energy storage, or Optimus humanoid robots, or that early Tesla and Space X show that giving this particular CEO abundant capital and time will produce at least one more "moonshot" success of EV‑scale--with Tesla stock being "several call options on futuristic technologies covered with a trench coat". Where might such bigger fools come from? Enter Bari Weiss's _The Free Press_ : > **Mark Gimein** : The Biggest Tech Bet in History <https://www.thefp.com/p/the-biggest-tech-bet-in-history-plus>: 'Elon Musk's SpaceX is going to go public. It is set to be the biggest IPO in history and, as **Patrick McGee** writes today, the "most consequential financial event this year."… Pundits _…_ pouring cold water… say only blinkered Musk fanboys would believe that an unwieldy network of satellites, rocket launches, and vague plans to go to Mars could be one of the 10 most valuable companies in the world. One _Atlantic_ story described SpaceX as "a huge meme stock." But they said that about Tesla, too, didn't they?… Musk's gargantuan SpaceX wager… is as much a bet on human ambition as it is on any one technology… might just be the most audacious bet in business history. But will it pay off? That's the question on everyone's lips as SpaceX prepares to go public, and it's the one at the heart of Patrick's story… Get 75% off a group subscription And so we have: > **Patrick McGee** : SpaceX Is the Riskiest, Biggest Tech Bet in History <https://www.thefp.com/p/spacex-is-the-riskiest-biggest-tech>: 'An IPO could value it at close to $2 trillion. Whether it's worth that depends on how you value Elon Musk's chances of transforming civilization: There are only two industrial actors in the world attempting to vertically integrate electric vehicles, batteries, chips, robotics, and artificial intelligence. One is China. The other is an industrial conglomerate overseen by a single person: Elon Musk. Try to keep this in mind as Musk's rocket company, SpaceX, prepares for the most consequential financial event this year: its public listing. Expected as soon as next month, it is expected to be the largest IPO in history by a long shot, raising roughly $75 billion at a **valuation of $1.75 trillion**. By conventional measures, that number can sound nuts. But Elon is anything but conventional…. > > In 2025… Tesla **sold 50,000 cars** and brought in more than $4 billion of revenue; in 2025, it sold **1.6 million cars** and earned nearly $95 billion in revenue. In 2015, SpaceX was launching a rocket every one to two months, on average; in 2025, it launched a rocket roughly **every other day**. A decade ago, Musk's foray into solar energy was embryonic; today, Tesla Energy is the **top global producer** of battery energy storage systems…. We're not halfway down the list of Musk's ventures, and haven't even gotten into the most interesting parts yet. Tesla doesn't just sell more electric vehicles in America than the rest of the competition combined. It also has its own charging network; builds some of its own battery cells; designs its own chips for self-driving features; and has started to refine its own lithium…. > > Starlink's network makes up **two-thirds of all satellites ever launched** into space. Then there's the fact that Musk also runs X, the social media giant, and xAI, the artificial intelligence group behind Grok, both of which recently merged into SpaceX in advance of its IPO, creating what may be a new kind of ultra high-tech conglomerate. And on top of all that, there is the pioneering brain implant start-up Neuralink…. We're dealing only with Musk's accomplishments, not his ambitions…. Many of his plans don't materialize. But enough have come to fruition to make his accomplishments genuinely world-changing. He's doing more to re-shore American manufacturing than anyone alive--in cars, rockets, robotics, data centers, and even brain transplants. I don't say this as a fanboy…. > > But it's not clear the traditional financial metrics are adequate here…. What's the total addressable market of a company whose market is, in Musk's telling, the solar system? Musk is set to receive an enormous pay package should SpaceX colonize Mars with one million people. Along the way, he hopes to build factories on the moon that can **catapult AI satellites** into orbit. Musk recently mused about **the possibility** of sailing "through the rings of Saturn." You might conclude he's a loon, until you remember his track record…. > > Aswath Damodaran, a finance professor known by CNBC as "the dean of valuation," ran a Monte Carlo simulation--a technique to simulate hundreds of possible futures--and produced **plausible company valuations** anywhere from $660 billion to $2.8 trillion, in effect a fancy way of saying that nobody knows. Which is what makes the SpaceX IPO so exciting…. Rocket science, it turns out, is the easy part. But whereas China will take on these tasks through hundreds of companies, Musk is doing virtually all of it on one balance sheet. The risks are huge, the rewards are civilizational… Refer a friend I think you have your answer to where the greater fools will come from. Transferring all of NASA's budget to Tesla and taking half of that as profit would support a SpaceX valuation of only $300B after all. But even if you buy all of that about Musk in general, there is still, well, not a joker in the deck but rather a deck composed 100% of jokers, at least as far as the investors in Tesla are concerned. There is this big question: Why should Elon Musk book the profits from whatever future moonshot successes he has (if any) to publicly-owned Tesla rather than to SpaceX? Tesla, after all, will pay SpaceX whatever prices Musk decides to charge Tesla for the services it provides. 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