Investor's Corner
Insight Into How Elon Musk Funds His Business Ventures
Elon Musk does not follow the herd. Even though most executives do not use their private wealth to fund business ventures, Musk believes it is important to to show that he personally has skin in the game.
More than almost any other entrepreneur, Elon Musk finances his three primary business ventures — Tesla Motors, SolarCity, and SpaceX — by leveraging his own personal assets. The Wall Street Journal (WSJ) says those three companies are valued at close to $50 billion, largely because of Musk’s “voracious appetite for risk and unyielding optimism.”
A study in February by ISS QuickScore found that just 13% of executives or directors at the 3,000 largest companies have pledged shares they own in those companies as collateral for personal loans.
Of the $105 million in bonds sold by SolarCity since October, 2014, SpaceX has purchased $90 million. Musk has taken out $475 million in personal loans at various times to help out one or another of his business interests when they needed cash injections. Those loans are secured by $2.5 billion worth of shares he owns in Tesla Motors and SolarCity, based on market values from this week.
WSJ says few top executives use their personal funds to support their business ventures because it can place them in conflict with other shareholders. It could also subject them to a margin call that could disrupt normal trading in company shares. “As an analyst, it is often a red flag for me when companies and management direct loans between entities they have personal or financial interests in,” says Nathan Weiss, founder and senior analyst at independent research firm Unit Economics LLC in East Greenwich, RI.
“There are a few cases where one company was doing considerably better than another and I borrowed money,” Musk says via WSJ. “If I ask investors to put money in, then I feel morally I should put money in as well […] I should not ask people to eat from the fruit bowl if I have not myself been willing to eat from the fruit bowl.” In other words, he thinks it’s important for others to see that he has skin in the game.
Musk says the odds of him not being able to handle a margin call are “almost zero.” That’s because his exposure is less than 5% of his total worth. He says he has “made it clear to shareholders that I subscribe to the notion that the captain is the last person off the ship.”
Venture capitalist Steve Jurvetson, a major early investor in all of Musk’s companies, says he is not concerned that Musk has pledged his own shares. As long as the total is less than 5% of Musk’s total net worth, “you don’t have much to talk about.” Jurvetson raves about Musk, saying “his passion is breathtaking.”
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Republicans in Congress are less in awe of Elon, however. Now that SpaceX has signed contracts worth billions of dollars with NASA, they are proposing legislation that would prohibit Musk from using his stake in SpaceX as collateral for other loans, particularly to SolarCity. The solar power company has recently had a loud and contentious spat with the Nevada Public Utilities Commission, which voted to impose a monthly fee on all rooftop solar installations in the state.
In response, SolarCity has shuttered his operations in Nevada and laid off hundreds of employees. How that plays out as the Gigafactory comes online should be interesting, since the same utility company (owned by Warren Buffett) that imposed its will on the Nevada PUC will also be the energy supplier to that gigantic manufacturing process. Tesla intends to sell excess power back to the utility, a process that started the whole controversy in Nevada in the first place.
Representative Douglas Lamborn, Republican from Colorado, says the proposed legislation is intended to send a message to Musk that his moves are being watched and monitored. A SpaceX spokesman retorts that SpaceX’s “cash balances are not government money’.”
Elon keeps his political leanings well out of public view. But it is clear his propensity for disrupting the established order has made a few enemies along the way.
Source: The Wall Street Journal
In a new note to investors on Tuesday, Morgan Stanley analyst Andrew Percoco said that Tesla has one big financial question to answer for investors regarding its Robotaxi rollout, Full Self-Driving software, and Optimus.
Percoco said in the note that, for the most part, investors are still very positive about the direction the company is headed. However, there are some things the firm would like to see, and they have to do with financials.
Tesla (TSLA) Q2 2026 earnings results: miss on EPS, beat on revenue
Tesla bulls are more than convinced that the company’s Full Self-Driving software is proof it can develop physical AI. Financially, however, there are still some questions, especially on elevated spending, which CEO Elon Musk said would occur as the company works to roll out Robotaxi faster and continue developing its Optimus robot.
The latter two are where Tesla will have to prove progress to investors, as Percoco writes that both projects “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Percoco said the second quarter earnings call did not change his long-term thesis of where Tesla is positioned in the AI race, which is out in front. However, there are concerns that weaker gross margins and higher R&D spend will stress financials, and that has “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
Additionally, Robotaxi still needs to be proven with more operation in existing cities while maintaining safety but improving how many rides it gives in any given time, he said. For Optimus, Percoco wrote that he is “still looking for evidence beyond commentary around SOP.”
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Morgan Stanley put Percoco in charge of covering Tesla after long-time analyst Adam Jonas transitioned to the automotive side.
Currently, Morgan Stanley has a $415 price target on Tesla and a ‘Hold’ rating on the stock. It is trading at around $330 at the time of publication, which was 2:30 P.M. on the East Coast.
SpaceX’s massive investment in AI will make it a big winner, Argus Research said after the company’s successful earnings call last week.
The firm also upgraded shares to a Buy from Hold and set a $160 price target.
SpaceX (NASDAQ: SPCX) is currently recovering from its heavy AI infrastructure investments, as it spent nearly $16 billion in Q2 alone. The company did this primarily by monetizing high-demand GPU compute capacity at a much faster pace than traditional data center economics would suggest.
Company CFO Bret Johnsen said that SpaceX would be able to pay back anything on new deployments within a year.
There are plenty of ways the company can do this:
Leasing excess compute capacity through contracts
SpaceX has already built Colossus and Colossus II, largely for its own model training. However, much of that capacity is already rented out to third parties. It already has major deals with Anthropic, Google, and Reflection AI. These partnerships are adding billions per month to SpaceX’s spreadsheet.
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High utilization driven by industry-wide scarcity
The demand for advanced AI training and inference capacity continues to exceed what is available for use. SpaceX can fill new racks quickly after they come online, so the capital deployed converts into revenue with minimal idle time.
Additionally, management and outside observers have described the new compute capital as behaving more like a cost-of-goods-sold than traditional multi-year capex, especially because of this rapid monetization pattern.
Capacity has already scaled from ~0.4 GW a year to 1.4 GW annually by the end of Q2. There are targets of more than 2 GW by year-end.
High incremental margins on the rental business once capacity is online
GPU cloud providers often operate at strong gross margins. SpaceX can monetize capacity that was already partially built or can be added efficiently. This means that incremental EBITDA margins on the rental revenue are usually high. This accelerates cash recovery relative to the gross capital outlay.
Parallel monetization of its own AI software and applications
Beyond pure infrastructure rental, SpaceX also generates revenue from Grok through subscriptions and usage, from X through ads, data, and other related services, enterprise APIs, and the planned integration of the Cursor coding tools acquisition.
These application layers ride on the same compute infrastructure and provide additional high-margin streams that could offset build-out costs. AI-segment revenue overall rose sharply to about $2.6 billion in Q2, according to Motley Fool. This was driven primarily by the infrastructure contracts, but the software side is also partially responsible.
Efficient, large-scale deployment and vertical integration advantages
SpaceX has emphasized the rapid construction of power and cooling infrastructure and favorable cost-per-megawatt economics relative to industry benchmarks in some disclosures.
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Combined with its ability to scale capacity aggressively and the fact that many contracts start generating revenue within months of capacity coming online, the effective payback compresses dramatically compared with more conventional multi-year data-center projects.
SpaceX’s dominant near-term recovery path will turn the AI clusters into a hyperscale-style compute rental business for other leading AI companies while still using a portion for internal models.
Elon Musk
Another Tesla SpaceX merger prediction by ARK Invest has Elon Musk talking
Elon Musk again denies a Tesla China split as new SpaceX merger speculation resurfaces quickly.
Elon Musk restated that Tesla has no plans to separate its China business from the rest of the company, responding to a new round of merger speculation from ARK Invest.
On the firm’s “Brainstorm” podcast, Cathie Wood’s team, including chief futurist Brett Winton and research director Nick Grous, argued a Tesla and SpaceX combination remains likely, with an announcement possible before the end of the year even if the deal itself would not close that quickly. Winton called Tesla’s Shanghai operations a “small ish wrinkle” for a merger rather than a real obstacle, since SpaceX’s national security work with the U.S. government sits uneasily next to Tesla’s manufacturing base in China.
Musk pushed back on the framing directly. “China is awesome. I strongly encourage people to visit,” he wrote on X. He also repeated language he first used in late July, when the Wall Street Journal reported that Tesla executives had been told to prepare for a possible spinoff, sale, or closure of the China business ahead of a SpaceX tie up. Musk called that report “absurdly fake news” at the time, adding that a separation had “never even come up in a discussion ever,” a line he echoed again this week.
The repeated denial has not settled the underlying question, because Shanghai’s role in Tesla’s business is exactly what makes a merger complicated. Gigafactory Shanghai still ships more than half of Tesla’s global deliveries and functions as the company’s main export hub for Europe and Asia. Teslarati previously reported on Musk’s initial denial, and the merger conversation itself has been building since SpaceX’s IPO gave it public shares to use as acquisition currency.
Wedbush’s Dan Ives has pegged the odds of a Tesla SpaceX merger at 80 to 90 percent by early 2027, and ARK’s prediction of a year end announcement adds another data point to that timeline, even as Musk keeps rejecting the specific mechanics reporters have described. Neither position rules out the other. Musk can deny a China spinoff was ever discussed while analysts still expect some form of combination to move forward, since ARK and Ives are both describing convergence at the corporate level, not necessarily the internal restructuring the Journal described in July.
For now, Tesla’s China business remains intact, and Musk’s comments this week make clear he has no interest in publicly walking that position back, no matter how often the merger question resurfaces.
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Tesla has one big financial question to answer for investors: Morgan Stanley
SpaceX AI investment gamble will make it a big winner, firm says
