The highly anticipated initial public offering (IPO) of SpaceX is set to launch this summer, potentially becoming one of the most awaited new stock listings in recent years, especially for followers of Elon Musk. Analysts believe SpaceX could achieve a valuation of up to $1.75 trillion, a high valuation reasonably supported by its powerful Starlink satellite business and the recurring revenue it generates.
However, will this blockbuster IPO act as a negative catalyst for another of Musk’s popular stocks, Tesla (TSLA)? Tesla’s own massive valuation stems not only from long-term expectations of continued business growth but also from investors betting on Musk’s vision, which has already far surpassed the electric vehicle business that currently accounts for the majority of revenue. Tesla’s current market capitalization stands at approximately $1.3 trillion, still making it one of the world’s most valuable companies, though it is now below SpaceX’s rumored valuation. Considering its profitability, Tesla’s price-to-earnings ratio of around 320 remains elevated. Once SpaceX discloses its financial data, investors will be able to more clearly judge whether its valuation is reasonable.
If a more attractive growth stock like SpaceX becomes available on the market, Musk’s followers may become less willing to hold Tesla. In 2025, Tesla’s revenue declined by 3%, with a cumulative increase of only 16% over three years. Intensifying competition in the electric vehicle sector has squeezed profit margins, worsening the outlook for future profit growth. Investors shifting their focus to SpaceX, which offers a clearer growth trajectory, could prompt them to sell off their Tesla shares entirely.
Entering 2026, Tesla’s stock has already fallen 22% and is down 30% from its 52-week high. The company’s first-quarter delivery figures missed analyst expectations, adding further fuel to bearish sentiment. A combination of high valuation, disappointing financial results, and a challenging industry environment may continue to pressure the stock price. The SpaceX IPO could further incentivize investors to sell Tesla this year.
Currently, Tesla’s GAAP price-to-earnings ratio exceeds 300x, implying that the market expects its growth rate to be several times that of the S&P 500. Yet in recent years, Tesla’s growth has stalled. Sales of its core electric vehicle business declined for two consecutive years in 2024 and 2025, with first-quarter performance also weak. Full-year 2025 revenue was $94.8 billion, slightly below the $96.8 billion recorded in 2023. Over the same period, operating profit halved due to a sharp drop in profit margins caused by intensified competition, with GAAP operating profit reaching only $4.4 billion.
Despite poor financial results, Tesla’s valuation remains high, with the stock having risen 40% since the end of 2023 even as its business scale has actually contracted. This is largely attributable to Musk’s pitches to investors about robotaxis and autonomous robots, though these areas have so far yielded little financial achievement. Its robotaxi service is only operating on a limited basis in two metropolitan areas, Austin and the San Francisco Bay Area, and the Optimus autonomous robot is not yet on the market.
JPMorgan analyst Ryan Brinkman released a research note on Monday stating that expectations for “all financial and performance metrics” for Tesla by the end of this decade have collapsed. Analysts generally expect modest growth over the next two years: revenue growth of 9% to $103.1 billion in 2026 and 17% to $120.5 billion in 2027. In the first quarter, Tesla delivered 358,023 vehicles, up 6.3%, but still fell short of expectations.
Tesla also benefits from a “Musk premium,” the additional value attributed to Musk’s leadership and vision. However, Musk himself is also a risk factor: his alliance with President Trump has alienated some car owners and potential buyers, and he often makes promises he cannot fulfill in a timely manner. For example, in 2021, Musk set a multi-year target of 50% compound annual growth, a goal the company achieved for only two years before abandoning it, though the target did boost the stock price at the time.
Overall, for a highly volatile stock like Tesla, the timing of a decline is difficult to predict, but there are clear signs of significant overvaluation. The company has struggled to grow for more than two years, yet its valuation remains on par with high-growth, disruptive enterprises. With interest rates remaining elevated and competitive pressures unabated, the bullish case for Tesla relies on breakthrough innovations, and these positives already appear fully priced in.
