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SpaceX: Elon Musk’s Greatest Scam? Mr. Arithmetic Weighs In

SpaceX headquarters, Bolsa Chica, Texas. Photo: Alexander Hatley, Wikimedia Commons. CC BY 2.0Last week was a big one for the AI bubble. SpaceX had the largest IPO ever and Elon Musk became the world’s first trillionaire. In fact, it was such a big deal I thought I would summon Mr. Arithmetic out of retirement to get his insights.

First, if anyone is wondering what rockets have to do with the AI bubble, you have to look at the company’s registration statement. It projects that more than 90 percent of its future market ($26.5 trillion of $28.5 trillion) is in AI. So, SpaceX is first and foremost an AI company.

Now, let’s do the numbers. The Friday close on the listed shares for SpaceX’s IPO gave the company an implied market capitalization of $2.2 trillion. Does this valuation make sense?

Ordinarily, we would first look to its price-to-earnings ratio (PE) to see how high it is. But we can’t really do that with SpaceX, since it lost $5 billion last year. So, the company has a way to go here. Clearly the company’s IPO is a bet on Elon Musk.

I know there are some who insist the guy is a visionary and a genius, but his track record has not been great, nor has his relationship with the truth. Paul Krugman gave a few prominent examples of Musk’s boasts that have not panned out in his Friday Substack. His Boring Company, which was supposed to create superfast trains between cities, has literally gone nowhere. The same goes with his Neuralink company that is supposed to give us brain implants that allow us to circumvent our normal physical processes.

He has promised us that Tesla would give us full-self-driving cars next year for at least a decade. And he was supposed to have a full system of self-driving taxis last year. Apparently, Tesla now offers limited service in Austin, Texas. By contrast, Waymo has extensive service in San Francisco, Phoenix, and a number of other major cities.

And for those keeping score on such things, Tesla’s profits were $4 billion last year, roughly 0.25 percent of its market capitalization. And the overwhelming majority of the profits came from selling carbon credits, a system that Musk’s good friend Donald Trump wants to end. In short, Musk’s track record in his business dealings has been less than stellar.

But his ventures into........

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