Eisman on Monday expressed skepticism about SpaceX potentially merging with EV Giant Tesla Inc (TSLA), highlighting the latter company’s many challenges.
- Eisman highlighted SpaceX’s high capital expenditure and pivot to AI.
- AI, he noted, accounts for a lion’s share of SpaceX’s valuation.
- The comments come as SpaceX prepares for what could be the largest IPO in history.
Investor Steve Eisman said Monday he is “not a fan” of the highly anticipated SpaceX initial public offering expected as soon as this week, warning that the rocket company’s pivot into artificial intelligence has transformed it into an extraordinarily capital-intensive business with few competitive advantages.
He further expressed skepticism about SpaceX potentially merging with EV Giant Tesla Inc (TSLA), highlighting the latter company’s many challenges.
Asteroid Mining Possibilities
Appearing on CNBC’s Squawk Box, Eisman pointed to SpaceX’s prospectus filed with the Securities and Exchange Commission as evidence of mounting risks. While the filing highlights ambitious goals such as asteroid mining — a detail he called “amusing” and reminiscent of the Apple TV+ series For All Mankind — he dismissed its near-term viability.
“The probability of asteroid mining happening anytime soon is pretty low,” Eisman said.
Steve Eisman is the American investor best known for correctly betting against the U.S. housing market and subprime mortgages before the 2008 financial crisis. Now he hosts The Real Eisman Playbook podcast.
High Capex And AI Investments
Far more concerning, he said, is the company’s surging capital expenditures. In fiscal year 2023, capex stood at just 42% of revenue when SpaceX was primarily focused on its Starlink satellite internet business. By the first quarter of this year, that figure had ballooned to 215% of revenue as the company ramped up spending on AI infrastructure.
“It’s not even space that’s so hard. It’s the AI,” Eisman said. “Grok, with all due respect to Elon Musk, is not a world-class AI company and I don’t think anybody speaks of Grok as being at the leading edge.”
Eisman framed the shift as part of a broader transformation sweeping the technology sector, moving it from an “asset-light” software model to one that resembles heavy industry. He noted that even cash-rich giants like Google are now raising tens of billions to fund AI compute needs, with rumors of similar capital raises at Meta and Microsoft. “The whole tech sector is being transformed,” he said.
LLMs Are Not Differentiable, Says Eisman
Compounding the issue, Eisman contended, is that the massive investments in large language models have produced largely undifferentiated products. “What’s being produced in terms of LLMs and Agentic AI… is not really differentiable,” he said. “There’s not that much difference between ChatGPT. It’s very commoditized. People are switching constantly from one to the other. There are no moats.”
He also highlighted pricing pressures that could further squeeze margins. Tech companies have historically charged for AI tokens well below their actual cost, he noted, but that is beginning to change — as evidenced by Microsoft’s GitHub now billing at higher rates — and customers are already pushing back on forums like Reddit. “It’s going to be very interesting to see how heavily people are going to be using AI once they get actually charged for the actual cost of the tokens,” Eisman said.
Is SpaceX’s Rocket, Satellite Business Enough?
While Eisman acknowledged SpaceX’s formidable position in getting payloads to orbit and its potential to charge “monopoly rents” for a period, Eisman said the valuation math still hinges overwhelmingly on AI. “Even if everything you say about SpaceX and Starlink is true, the entire company is being bet on AI in terms of its future, not on space and not on Starlink,” he said. “Those are his words, not mine.”
According to SpaceX's prospectus, the company’s total addressable market is pegged at $28.5 trillion — with over 85% tied to AI rather than its core space and Starlink operations.
Potential Tesla-SpaceX Merger
Eisman also expressed skepticism about any potential merger with Tesla, noting that the electric-vehicle maker’s earnings have declined for four straight years in a highly competitive, capital-intensive business increasingly dominated by lower-cost Chinese rivals.
“If I was a SpaceX shareholder, the last thing I’d want would be for him to buy Tesla,” he said.
SpaceX IPO
The comments come as SpaceX prepares for what could be the largest IPO in history. The company, led by Elon Musk, is reportedly targeting a valuation north of $1.77 trillion and could begin trading on the Nasdaq under the ticker SPCX as soon as June 12.
On Stocktwits, retail sentiment around SPACZZX was ‘extremely bullish’ at the time of writing.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<
