In a 2022 interview with a crew of his sycophants, Elon Musk said that for Tesla, “the overwhelming focus is solving full self-driving. That’s essential. That’s really the difference between Tesla being worth a lot of money and being worth basically zero.” In April 2024, Musk told investors and journalists that Tesla is “an AI, robotics company; if you value us otherwise, the right answer is impossible to the questions being asked.”
Yesterday, The Wall Street Journalreported that Elon was leading a group of investors to try to buy OpenAI for $97.4 billion.
Just ask the questions posed by Elon Musk and only Elon Musk here. If Tesla is “worth basically zero” without full self-driving–a feature it does not have yet that is run by AI, the kind of company that Tesla apparently is now–what is Tesla worth, and if it was a successful AI company as promised, why would Musk be buying another AI company? As ridiculous as the assertion that Tesla is an AI company may sound, Elon Musk has a very good reason to say that: the last thing he ever wants is for Tesla to be judged like a car company. He might be broke if it was.
Let’s take Toyota Motor Corp, General Motors, Ford and BMW’s price to earnings (P/E) ratios as an example as to why. A P/E ratio is one of the simplest ways to measure fair value for a stock, as you simply put the stock price in the numerator, and the companies’ earnings per share in the denominator. As of this writing, Toyota’s P/E ratio is 7.37, GM’s is 7.31, Ford’s is 6.3 and BMW’s is 5.87.
This means that for it to be valued like a real car company, Tesla either needs its earnings to exponentially increase several times over, or its stock price needs to fall. A lot. Like over 90 percent to get to the average P/E ratio of those four giant car companies.
And ever since Elon started making googly eyes at OpenAI, Tesla’s stock has been down only. The vertical white line on the chart below is when WSJ initially reported this overture, and the blue candles to the right of it are steadily marching TSLA downwards (side note to people who look at charts: red and green candles affect you more emotionally, it’s better to use a softer or cooler color for your up and down candles).
Chart by TradingView
If you are a Tesla investor, and you have heard this supposed genius founder talk about how Tesla is an AI company, how would you feel about that founder selling Tesla stock to buy another AI company? Also, Musk already has his own AI company that just raised $6 billion! Where exactly does Tesla, the AI company, fit into all of this?
Now some Elon stans will surely call me a fool and point to the tried-and-true method of vertical integration, but the problem here is that the value that Open AI and xAI theoretically pose to Tesla as an AI company is vague at best, and the stock price’s reaction since the news broke is heavily suggestive that this is not good news for Tesla. One way this offer could be interpreted is Musk accepting that his bid to make people see Tesla as an AI company has failed and now, he is trying to cash out of it into a different AI company.
Not to mention, Elon’s offer may sound astronomical for a chatbot, but in actuality, it’s an insult. OpenAI is not worth $97.5 billion, not even close. In October, OpenAI raised a round of funding including Microsoft, Nvidia, and SoftBank at a $157 billion valuation. A stink bid, as it’s called in the markets, is where you make an offer much lower than current market value in the hopes that something happens which allows you to buy it at an extreme discount, and this is what Musk is doing. Elon is such a doddering dumbfuck that he’s making a con man who asked to be handed the equivalent of a third of U.S. GDP to make his product work look like the protagonist in this mess.
This is like Kendrick and Drake if both of them were Drake.
Certainty is anathema to any good market-based analysis, and if Tesla’s stock price should fall because it is so clearly over-valued, then it would have crashed a long time ago. Tesla has defied gravity in a way that no other company has, and betting against the market trend is only smart in the movies. That said, these are precarious times for the source of Elon Musk’s wealth.
There will be mounting calls for big investors to divest from Tesla, and if there is progress made on that front, that is when things will get real. Tesla’s entire appeal is as a number go up machine, not a stock with any kind of real value to squeeze juice from, and superimposing the Bitcoin chart (in pink) over it tells the real story of why people buy TSLA (in blue).
Chart by TradingView
Sam Altman is not going to sell OpenAI for anything less than $157 billion, and this seemingly pointless and trollish overture by Elon has damaged Tesla’s already frail-looking stock price. Masterful gambit, sir.
It was headed down from its recent all-time high in December due to slowing sales already, and if enough people realize that real car companies make electric cars now and the demographic who used to be the most likely to buy a Tesla is now the least likely to buy one, things could turn on Tesla quickly. As a veteran of the crypto wars, I’ve seen firsthand what it’s like when everyone sees that smart money has already cashed out and panic begins to mount as folks realize the value of what they own is entirely wrapped up in its inflated price that is now falling.
Given how leveraged Elon is on Tesla, if this snowballs fast enough, we may get a chance to see what some of his magic numbers are where chunks of his net worth would get blown to smithereens if he does not have the liquidity on hand to cover his debts. The only good news these days seemingly is that Tesla is in the most precarious position it has ever found itself in, and Elon just made it worse.
