The $3.5T Bailout: Elon's Plan To Merge Tesla And SpaceX

Tesla

Across the shows: 16 speakers in other episodes, 15 bullish and 11 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBearish

  Tesla's core business is shrinking, and its roughly 300x P/E is unjustified against an auto industry near 18x.

  Galloway compares the two companies' latest quarter. SpaceX revenue rose 161% with about $4.4B net income and a 60% EBITDA margin. Tesla's revenue was flat, operating income fell 56% to a 2.6% margin, and deliveries fell 2%. He says Tesla trades at a P/E near 300 against an industry near 18, and calls it a company 'on its eighth of nine lives' that is out of magic tricks, citing the Roadster promised in 2017 and delayed four times. He states he is a Tesla shareholder.

  “SpaceX revenue is up a 161% with net net income of 4,400,000,000 and a 60% EBITDA margin. Tesla's revenue is flat, and operating income is down 56% with a 2.6% margin, and deliveries are down 2%.”at 8:13

• Scott Galloway · NYU Stern School of BusinessBearish

  Tesla is making no real progress in autonomy, doing far fewer rides than Waymo, and robot targets look unlikely.

  Galloway argues Tesla's autonomy claims are not backed by performance. Waymo is doing about half a million rides a week, while Tesla does very few, with a safety monitor in the front seat. He doubts the promised five million robots a year will happen and expects autonomy to fall short of expectations. He says he is a Tesla shareholder.

  “Okay. You're making no progress in autonomous. Waymo's doing a half a million rides a week. You're doing very few with a safety monitor in the front seat.”at 10:45

• Ed Elson · Prof G MediaBearish

  Tesla is in structural decline, with falling revenue and deliveries, and its stock has badly lagged.

  Elson cites Tesla stock down 13% over the past year and underperforming the S&P 500 by about three times over five years. He says the core business is in decline: revenue fell again last quarter and car deliveries fell as well. He argues the robotaxi and other stories are being used to distract from this. He says he owns Tesla indirectly through S&P 500 index holdings.

  “Tesla stock, it's down 13% in the past year... the business is actually in decline. It's because revenue has fallen. It just fell again last quarter. The car deliveries just fell as well.”at 13:01

• Ed Elson · Prof G MediaBearish

  Tesla's robotaxi is millions of miles behind Waymo, which is the clear front-runner.

  Elson says the robotaxi is the story investors are excited about, but Tesla is millions of miles behind Waymo. He describes Waymo as the winner and front-runner in the race, 'and it's not even close.' He treats this gap as a reason the Tesla story faces pressure. He says he owns Tesla indirectly through the S&P 500.

  “The story people are excited about is the robotaxi... the robotaxi is, like, millions of miles behind Waymo, which is the the winner and the front runner in this race, and it's not even close.”at 13:38

• Ed Elson · Prof G MediaBearish

  Tesla holders get SpaceX stock whose price could fall, erasing the premium and their voting protections.

  Elson expects the deal to be a stock swap, with Tesla holders converting shares into SpaceX stock at a premium RBC puts at 20-30%. Because the currency is SpaceX stock, the premium disappears if SpaceX falls 20% the next day. He sees that as likely, since he thinks SpaceX is overvalued. He also argues the deal consolidates control: Musk holds about 80% of SpaceX's votes versus about 20% at Tesla. Non-voting SpaceX shares would let Musk drop the shareholder protections that constrained him at Tesla, so Tesla holders would give up voting rights and buy into a precarious valuation.

  “But you also have to remember that the currency is gonna be the SpaceX shares... if SpaceX stock falls by 20% the next day, then you're not actually getting a premium.”at 20:44

• Scott Galloway · NYU Stern School of BusinessBearish

  No outside buyer would pay Tesla's current price, so a SpaceX premium deal would be unsupported and hurt Tesla

  Galloway says a special committee would benchmark the deal against what an outside buyer would pay for Tesla. His answer is that buyers would pay about 30 cents on the dollar, and no one would pay even the current price, let alone a premium. He compares it with Apple, the most plausible acquirer, which would need roughly $2T for Tesla (about $1.5T market cap) and would take 30-40% dilution, so he doubts it would happen. He expects a like-for-like share exchange at the closing price, and thinks any deal would produce an ugly first-day hangover in trading. He adds that regulators, CFIUS and antitrust reviewers, and state attorneys general will not simply rubber-stamp the merger.

  “What would someone else pay for Tesla? And the answer is they pay 30¢ on the dollar. There is no one out there that would even pay the current price, much less a premium.”at 38:25

Space Exploration Technologies

Across the shows: 31 speakers in other episodes, 23 bullish and 13 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBearish

  SpaceX shareholders are on the losing side of the Tesla deal, which is a rescue for Tesla.

  Galloway frames the merger as a rescue. Tesla is the patient and SpaceX is the organ donor, so SpaceX shareholders pay for Tesla's decline. Tesla shareholders win because they swap declining shares in a declining car company for a stake in Starlink and AI. Musk wins by keeping control. He also says some real synergies exist, such as SpaceX buying over $1B of Tesla batteries and Tesla's manufacturing scale, but calls it 'a real merger with a fake premise.' He cites Musk's history with SolarCity and Twitter.

  “So right now, Tesla is the patient, and SpaceX is the organ donor. SpaceX shareholders are the organ donor. So who wins? Tesla shareholders.”at 8:13

• Ed Elson · Prof G MediaBearish

  SpaceX's $2 trillion valuation is inflated by a tiny float and bank research, so it is not real.

  Elson calls the SpaceX valuation 'basically bullshit' because the float is only about 15-20%, versus near 100% for Nvidia and Microsoft. He says a small float means no genuine price discovery and makes the price easier to manipulate by large holders. He says banks inflate price targets, such as Raymond James's $10T target, to win underwriting for coming debt and equity offerings. He points to the SEC removing the rule that limited this conflict. He describes SpaceX's pitch as a sequence of narratives: orbital data centers, asteroid mining, Mars colonies.

  “I think the SpaceX valuation is basically bullshit. And the reason it's bullshit is because the float is still incredibly small. It's still around 15 to 20%.”at 21:06

• Scott Galloway · NYU Stern School of BusinessBullish

  SpaceX is booming with no close rival to Starlink, and its launch capacity dominates the world.

  Galloway says SpaceX is 'busting into outer orbit,' with revenue up 161%, net income around $4.4B, and a 60% EBITDA margin. He says the rest of the world has only 8% of launch payload capacity. He personally sees nothing like Starlink, and expects competition eventually but none yet. He calls SpaceX's promise real, while also saying it is dramatically overvalued.

  “SpaceX still has the promise of... The entire rest of the world has 8% of the launch payload capacity right now... I can tell you personally, there is nothing like Starlink.”at 28:03

• Ed Elson · Prof G MediaBullish

  SpaceX could get fast-tracked into the S&P 500 through the Tesla deal, forcing index buying.

  Elson reads S&P's bylaw exception for non-eligible companies that acquire index constituents and pay in stock. He says the Tesla deal would fit that exception. Once SpaceX is in the index, index funds would have to buy, which would push the price up further. He hedges that this is conspiratorial and he is open to being wrong.

  “In other words, there is an exception to the rule... So I could see this turning into the grand circus act of Elon's going to acquire this company, and that way SpaceX is included in the index.”at 33:51

• Scott Galloway · NYU Stern School of BusinessBullish

  Given Musk's track record, SpaceX will likely be added to the S&P 500 via the Tesla deal.

  Galloway agrees with Elson that the stock-for-stock merger gives the S&P committee grounds to waive eligibility rules on profitability, float, and trading history. He cites JPMorgan's estimate that inclusion would create passive buying equal to about 10% of the combined company's free float, and calls that real.

  “given Elon's track record, I genuinely think that that is going to happen here... JPMorgan also estimated that inclusion would create a passive buying equal to about 10% of the combined company's free float, which is real.”at 34:40

• Ed Elson · Prof G MediaUncertain

  SpaceX will join the S&P 500 by acquiring Tesla, a backdoor into portfolios

  Ed offers a hot take that SpaceX will join the S&P 500 even though it does not clearly qualify. His mechanism is that SpaceX will acquire Tesla, and that deal will become its shortcut into index portfolios. He says he hopes it does not happen but thinks it will. He admits he does not know if it will actually happen.

  “I think that SpaceX is gonna join the S and P not because it actually qualifies for joining the S and P, but because it's going to take the backdoor option of acquiring Tesla”at 1:20:54

Meta Platforms

Across the shows: 41 speakers in other episodes, 38 bullish and 19 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessUncertain

  Meta's new non-voting stock issuance is a move to keep Zuckerberg's control, not a sign of need

  Galloway reads Meta's 10-Q, which mentioned the difficult capital-raising environment, as justification for new stock issuance. He thinks this is a way to create a new class of non-voting stock so Zuckerberg keeps control. This would let him raise capital quickly, for example around $15B overnight, if a proposed wealth tax passes, without giving up control. He sees the move as a control and financing play rather than evidence of AI returns, so the signal is about financing motive.

  “I saw it as them trying to create a new class of stock that's nonvoting such that he can maintain control.”at 1:12:34

• Ed Elson · Prof G MediaUncertain

  Meta's AI capex is outrunning its cash flow, pushing it toward equity and debt raises

  Ed reads the planned share issuance as partly a need to raise money for capex. He says Meta plans to spend a very large amount, is running out of cash flow, and does not want to keep raising debt. He also reads the filing as a sign that the company may struggle, though he says it is both a control move and a capital-raising need. He calls the capex spending a little crazy even though the underlying businesses are strong.

  “They're going to spend this amount of money, and they're running out of cash flows. And they don't wanna keep raising debt.”at 1:13:03

• Scott Galloway · NYU Stern School of BusinessBullish

  Meta can finance its huge AI capex by offloading risk to private credit

  Scott disputes the idea that Meta is struggling to raise capital for its AI spending. He says Meta can keep many of its capital commitments off balance sheet and offload that risk to private credit sources. Its stock is near an all-time high and its business is firing on all cylinders, with revenue up 26% on fewer employees. Scott reads the planned share class as a control move rather than a sign of financial stress, and says the business can fund the ridiculous capex it requires.

  “They're able to offload that risk to other private credit sources.”at 1:13:36

• Scott Galloway · NYU Stern School of BusinessBullish

  Meta will be the biggest AI-boom winner, due to distribution moat and cash flow

  Meta's AI strategy is bearing fruit and is a model only Meta can execute. Despite technologists calling its LLMs a parody next to Anthropic and OpenAI, Meta has unmatched distribution: direct relationships with about 500 million businesses, where rivals have thousands, and no single advertiser is more than about a third of a percent of revenue. It also reaches roughly 3 billion users daily. Layering a model and cash flow to fund the capex on that base lets the advantages compound. Scott sees the agentic commerce layer and messaging as likely wins, and says Instagram's AI-driven engagement is unusually addictive. He names Meta as his pick for the company that will look back as the big AI winner in three years.

  “Meta. AI strategy is finally bearing fruit, and it's a business model only Meta can execute on.”at 1:15:45

• Ed Elson · Prof G MediaBullish

  Meta is the best AI play; trades at a huge discount to private Anthropic

  Ed bought Meta this year and says his position is up. He argues Meta is competing neck and neck with Anthropic while being one of the most profitable businesses in the world. Ad growth shows up in the numbers: impressions and engagement are growing double digits, price per ad is rising, and better targeting earns higher CPMs. He says that if the recommendation algorithm's strength comes from AI and machine learning, the returns are already visible in Meta's earnings. He calls the gap between a roughly $1.6 trillion public market cap and Anthropic's reported $2 trillion private valuation a clear dislocation between private and public markets. The main drawback he sees is very heavy capex spending.

  “I hate to admit it. It's Mark Zuckerberg and Meta right now. I think I agree.”at 1:20:36

BYD Company

• Scott Galloway · NYU Stern School of BusinessBullish

  BYD builds a better Tesla for half the price, a serious competitive threat to Tesla.

  Galloway says Tesla has no [moats], while BYD is making a better version of the Tesla car for half the price. He uses this to argue Tesla's valuation rests on promises rather than a defensible product lead. He does not give BYD financials.

  “Tesla has no [moats]. BYD is making a better Tesla for half the price.”at 28:03

xAI

Across the shows: 3 speakers in other episodes, 1 bullish and 1 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  xAI, the AI portion of SpaceX, is up ninefold and its story has legs.

  Galloway says the AI portion of SpaceX is up nine times. He concedes it is off a small base, but argues that story has legs. He contrasts this with a Tesla story he sees as running out of steam, so the merger brings in a growing AI business.

  “the AI portion of SpaceX is up nine x. Now granted, it's off a small base, but that story has legs.”at 28:03

Anthropic

Across the shows: 45 speakers in other episodes, 24 bullish and 38 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  Anthropic's reported loss is mostly non-cash, and its business is more successful than the media says

  Galloway argues the headline $80B loss is misleading. About $72B is an accounting charge from convertible debt that converts to equity as the equity value rises. The real figure is about a $9B loss on $16B of revenue, with revenue growing roughly ninefold year on year. He has read the leaked numbers and the latest funding-round valuation, and thinks the media is unfairly downplaying the company's success. He expects the S-1 to describe a business that is living up to its promise.

  “So, really, the kinda accurate number is they lost 9,000,000,000 on 16,000,000,000 in revenue, and I think they 9x'd their revenue year on year or something.”at 54:25

CoreWeave

Across the shows: 46 speakers in other episodes, 12 bullish and 41 bearish calls, past 30 days

• Ed Elson · Prof G MediaBearish

  CoreWeave and other neoclouds locked in high-rate debt and will see a handful go bankrupt

  Elson argues neoclouds such as CoreWeave borrowed heavily at very high interest rates to build data centres. Those data centres are running behind schedule and the chips are sitting idle, so the debt is not being serviced by revenue on time. He expects a handful of these companies to go bankrupt, the way railroad companies with mismatched durations did in the 1870s. He points to CoreWeave's 52% drop over the past month and says the market is already pricing this in.

  “They also have locked in these very, very high rates because they've been taking on debt companies like CoreWeave, like basically all of the neo clouds. And, yeah, it's gonna be the same thing. It's gonna be a handful of companies like them going out of business.”at 1:08:14

NVIDIA

Across the shows: 38 speakers in other episodes, 33 bullish and 12 bearish calls, past 30 days

• Ed Elson · Prof G MediaUncertain

  Nvidia looks dislocated and sentiment will hurt it, but Elson is unsure on fundamentals

  Nvidia's forward earnings multiple has been roughly halved over the past year. Its earnings have grown faster than its stock, so investors are discounting future profits for sustainability risk. Elson says the stock feels dislocated and he expects a large slowdown in the AI cycle that will keep hurting sentiment toward Nvidia. He is unsure about the fundamentals, though, and says he is stuck on the stock. The chips sitting idle and the likely smaller next GPU order are also part of his caution.

  “It does feel a little bit dislocated, but I don't see how we don't see a massive slowdown in the AI cycle, and I don't see how the sentiment wouldn't continue to hurt NVIDIA.”at 1:10:23

Eli Lilly and Company

Across the shows: 4 speakers in other episodes, 4 bullish and 0 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  Eli Lilly will beat its ambitious estimates in upcoming earnings; GLP-1s transformative

  Scott calls Eli Lilly the AI trade of your waistline and says it is the most interesting company to come out of Indiana. He predicts its upcoming earnings will show results that blow away its already ambitious estimates. He reaffirms his view that GLP-1 drugs will be more transformative than AI, and says the earnings report will show it.

  “I think it's kind of the AI trade of your waistline. I think it's... gonna even blow away its incredibly ambitious estimates.”at 1:14:39

AI infrastructure & data centers

• Scott Galloway · NYU Stern School of Business

  Cloud margins are expanding, so the AI infrastructure build is not a glut

  Galloway rejects the claim that AI infrastructure is oversupplied. In a glut, prices and margins fall, but AWS's operating margin rose from 33% to 39% and Google Cloud's rose from 21% to 36%. He reads the construction delays and stranded chips as normal friction, the kind seen in home renovations. In his view the constraint is power and data-centre capacity, not too much supply.

  “AWS's operating margins rose from 33 to 39. Google Cloud's operating margins went from 21 to 36. If there was a glut, margins would be collapsing. Instead, they're expanding.”at 55:26

• Scott Galloway · NYU Stern School of Business

  Big Tech keeps spending on AI because it fears underspending, and the spend needs huge AI revenue to pay off

  Galloway says hyperscalers are afraid to stop spending even though demand looks infinite in many scenarios. They fear falling behind, and the spend is also a moat, since only a few companies can make such commitments. He likens this to the Yellen-era stimulus, where the perceived risk of underspending outweighed the risk of overspending. The commitments imply AI revenue of about $3T, roughly double the roughly $1.5T big tech earns today, and that is the existential risk. He notes that companies are moving some of the spending into private credit vehicles so losses would not hit their equity.

  “I feel as if they're afraid to stop spending.”at 1:04:11

• Ed Elson · Prof G Media

  AI chips are overbought and idle, as data-centre delays leave depreciating GPUs and cut future orders

  Elson cites reporting that Amazon is spending billions a month on Nvidia racks it cannot install, so they sit in warehouses. Eight data-centre listings have been pulled, postponed, or repriced since September. He says the hyperscalers overbought because data centres, power generation, transformers and grid connections take far longer to build than expected. The chips are depreciating meanwhile, so he expects the next GPU order to be significantly lower and data-centre builders to struggle to make profits. Free cash flow at Amazon, Google and Meta is negative, and whether the spending earns a return is an open question.

  “They ran into this snag, which is that it's actually very, very difficult to get data centers online as quickly as they had hoped. And so now they have all of these chips that are depreciating.”at 1:07:46

IPOs, M&A & deal activity

• Scott Galloway · NYU Stern School of Business

  Most acquisitions destroy shareholder value, and CEO pay incentives push leaders toward empire-building deals.

  Galloway argues CEO compensation is set by boards that favour acquisitions, creating an incentive to do deals even when they make no sense. Each CEO hopes for a transformative deal like Zuckerberg's Instagram purchase. He says about seven to 10 acquisitions end up destroying shareholder value. He applies this to the Tesla-SpaceX deal, where the special committees may be building an empire.

  “CEOs have a tendency to want to do acquisitions... The reality is about seven to 10 acquisitions end up destroying shareholder value.”at 34:40

• Ed Elson · Prof G Media

  AI data-centre IPOs are performing badly, with one falling over 30% on its first day

  Elson points to several AI data-centre IPOs. One was cancelled, another was delayed, and a recently listed data-centre company fell more than 30% on day one. He calls this a canary in the coal mine for AI data-centre companies going public, arguing they do not do well after listing. He links it to the wider pullback in data-centre listings since September.

  “which is another data center company, they went public, and immediately the stock just craters more than 30% on day one, which kind of is a canary in the coal mine for what happens when AI data center companies go public. They don't do very well.”at 51:51

AI bubble & tech valuations

• Scott Galloway · NYU Stern School of Business

  AI is in a correction, not an implosion; the bubble-pop narrative is overstated

  Galloway agrees a correction is coming but rejects the media narrative that AI is a clear bubble about to pop viciously. He says the AI trade still shows unprecedented velocity in revenue, adoption, new products and capital formation. He expects a soft landing in which stocks fall 10, 20, or even 50%, with revenues catching up if the companies keep growing. He says people he speaks with who work at or invest in these companies see growth they have never seen before.

  “I think we're in the midst of a correction, but not an implosion.”at 53:04

• Ed Elson · Prof G Media

  The AI bubble is real but priced into public markets, so a crash is unlikely until hyperscalers are at extreme multiples

  Elson says the AI bubble is real and is infecting private markets, but public investors have already priced the risk. Nvidia's forward multiple has halved, Nebius is down 31% and CoreWeave 52% over the past month, Oracle is down 15%, Micron 18%, and the semiconductor ETF 15%. He reads these moves as the market discounting the sustainability of profits. He would not expect a crash until the hyperscalers trade at 50, 60 or 70 times earnings, and he thinks investors are pricing the stocks that matter sensibly.

  “all of that anxiety, all of that risk, I think is being priced in.”at 59:27

Credit markets

• Ed Elson · Prof G Media

  Credit markets are souring on AI, with record CDS spreads on major AI names like Oracle

  Elson says credit default swap spreads are widening every day and hitting record highs on some of the biggest AI names, Oracle among them. He reads this as credit investors growing wary of AI borrowers, and he cites Nvidia and CoreWeave hitting record highs alongside it. He treats the widening as a sign that default risk is being priced, notably for CoreWeave.

  “We're seeing that the credit markets are souring on AI. We're watching credit default swap spreads exploding every day, and they're hitting record highs on some of the very big AI names like Oracle.”at 51:54

Power demand & the grid

• Scott Galloway · NYU Stern School of Business

  Power, not chips, is now the bottleneck for AI, so the constraint is electricity and data-centre capacity

  Galloway says the scarce input has moved from chips to electricity. Amazon stockpiled GPUs, which he calls a smart move by one of the best supply-chain operators in history, but the constraint turned out to be power and data-centre capacity. He concludes that the market has too little power rather than too much supply, which is why the chips are sitting idle and why construction delays are hurting. This is the basis for his view that the buildout is delayed rather than oversupplied.

  “The bottleneck has moved from chips to electrons.”at 53:18

Venture capital & startups

• Ed Elson · Prof G Media

  The AI bubble is unpriced in private markets, and AI startup funding is getting harder to raise

  Elson argues that VCs love the technology and the founders and do not care about $1.5T or $2T valuations, so private AI pricing ignores the risk. He expects Anthropic and OpenAI to face much more discerning investors once they go public, which will be a rude awakening. Meta's 10-Q warned that raising capital had become an increasingly challenging environment, and founders he knows say the vibes have shifted. A billion-dollar round was easy a month ago but is not now, and capital is more hesitant even if not drying up.

  “The only place where I think that the bubble is not being acknowledged and is not being properly priced is in the private markets.”at 1:01:32

AI: overall outlook

• Scott Galloway · NYU Stern School of Business

  The traditional players will win the AI buildout, and newer, smaller players will suffer

  Galloway draws on the railroad boom. The technology survived and changed the world, but there were many bankruptcies along the way. He thinks the established incumbents will be the big winners of the AI buildout, and the newer players will be the ones that suffer. Elson agrees, and the two link this to the cash-flow and debt problems of the newer neocloud players.

  “I think a lot of the traditional players are gonna be the big winners here, and a lot of the newer players are gonna be the ones that suffer.”at 1:06:22