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Mihir Desai, a professor of law and business at Harvard University, published an article earlier this month suggesting that Elon Musk's business empire may be starting to falter. While many are saying that Tesla's stock price has halved since hitting an all-time high in December, if you look at the bigger picture, the stock is still up more than 50% over the past year .
The stock price itself doesn't necessarily say much about the health of a business, as Damodaran of New York University has long argued that company valuation shouldn't be viewed as just a mathematical exercise . In his book, Narratives and Numbers, he argues that assessment is a bridge between stories and numbers, where every story becomes a number in the assessment, and behind every number in the assessment is a story.
Matt Levine previously argued that Tesla investors are not valuing Tesla or any of Musk's companies for what they actually do. Instead, they see them as venture capital funds run by a guy with a strong track record of investing in whatever is hot . If a company's earnings don't match its stock price today, it doesn't matter to them , because next year a great new product will be introduced.
Solar tiles, a robot, a tunnel to Europe, a sports car with rocket engines, general artificial intelligence, a Twitter-based “super app” or a colony on Mars. And this business, which is just around the corner, will be so profitable that the skeptics will be proven wrong. Of course, I'm not a skeptic.
Regular viewers know how positively I have spoken about the Hyperloop downtown The Line in Saudi Arabia. And if it weren't for Musk's Hyperloop functionality, none of this would make any sense. By the way, completely off topic, Elon Musk told Fox News on Thursday that the administration will prosecute people who spread lies about Tesla.
So, to be clear: I expect all of the above projects to be implemented next year on schedule, and I think they will be great. Desai points out in his article that while Elon Musk built an automobile company from scratch along with a number of other ventures, which is a remarkable achievement, his wealth is largely due to a financial cult.
Because Musk remains largely immune to criticism, he writes that Tesla's soaring stock price has made fans and investors so loyal that simply mentioning a new ambition is enough for Musk to spur them to buy even more shares. and the larger the ambition voiced, the more wealth and power they confer upon him.
He claims that since Musk entered politics not only in the US but around the world, cracks have begun to appear in his empire. He highlights Tesla's declining revenue and profits from its automotive business and notes that 22 years after the company was founded, it's unclear whether it will ever be able to generate significant free cash flow for shareholders.
He says Tesla appears to be increasingly relying on price cuts—a practice that may boost sales in the short term but hurts the brand in the long term. He argues that the political backlash against Musk is currently hurting Tesla's sales, and that perhaps sensing a shift in sentiment, Musk has begun to imply that Tesla is an AI company to further fuel the investor cult.
Looking at Musk's other business interests , the Harvard Business School professor argues that Solar City has atrophied since Tesla's controversial acquisition in 2016. What is unclear is whether the Boring Company has any revenue or prospects for profitability. That the possibility of turning a profit for Neuralink, a brain implant company, seems even less likely, and Twitter has become a shadow of its former self —both economically and culturally—after the acquisition.
He notes that SpaceX, which is over 20 years old, has raised about $12 billion and is only now rumored to have reached $12 billion in annual revenue, which is not the same as profit, largely thanks to Starlink. Desai points out that Musk's wealth does not come from the cash flows generated by his various businesses.
More money was invested in them than they returned in profits. Instead, his fortune is based on their market valuation, which is fueled by the hype surrounding Musk and the belief that incredible breakthroughs are just around the corner. Musk's business hasn't been generating much hype lately. Growth seems to have stalled and competition has intensified.
One of Tesla's most active investors even called on Musk to step down as CEO. Before we get to that , let me tell you about the sponsor of today's video —the Delete Me service. Delete Me is a subscription service that finds and deletes your personal data collected by data brokers and put up for sale online.
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Tesla shares have nearly doubled since Donald Trump's election victory last November amid optimism that Musk's alliance with the new president would remove business obstacles and perhaps pave the way for lucrative government contracts . At the time, Tesla was under investigation in a criminal fraud case, as well as under an SEC investigation for exaggerated claims about the full autopilot capabilities of its cars.
The company faced a joint investigation by the Department of Justice and the SEC into the misuse of company resources for plans to build a private residence for Musk with the firm's funds. The US Attorney's Office was investigating whether Tesla intentionally misled customers about the range of its electric vehicles.
Four NHTSA investigations into technical problems with the vehicles have also been launched. Seven employment rights cases, a racial discrimination investigation, and an OSHA investigation into a worker's death. His other businesses have also faced investigations and federal lawsuits. President Trump has replaced a number of administration officials who oversaw many of these investigations.
According to the Washington Post, Elon Musk's DOGE department was able to reduce staff in several agencies that regulate its business. When asked about a conflict of interest during a joint interview with President Trump on Fox News, Musk said, " I will recuse myself if there is a conflict." And the president said he would not interfere.
While the ability to close the investigation into his business should help him, Elon Musk recently admitted in an interview with Fox Business that he is running his companies with great difficulty. And that really seems like the truth. Tesla has lost all of the share price gains it saw after the election.
And the backlash against his companies was so severe that the president had to buy one of his cars on live television, praising it, presumably to revive sales. Everything is a computer. Musk's Twitter account was taken down by a cyberattack, and two of his Starship rockets exploded shortly after launch, leading to flight cancellations in Florida and the Caribbean and warnings of falling space debris.
According to the European Automobile Manufacturers Association, Tesla sales in Europe fell for the second consecutive month in February. And to make matters worse , this came at a time when electric vehicle registrations on the continent were generally on the rise. Tesla's sales in Europe have fallen by more than 40% since the beginning of the year, and the company's share of the European market has declined rapidly.
The press explains this by several reasons: outdated design, increasing competition, and controversies surrounding Elon Musk. The problem is not only in Europe. According to Kelly Blue Book, Americans registered 11% fewer Tesla cars in January than a year ago, while registrations of electric vehicles from competing brands increased by 44%.
According to the website Futurism, Tesla's sales in China fell 49.2% year- on-year, while BYD, Tesla's main Chinese competitor , increased sales by 90% in the same month. Although the decline in sales in the US and Europe can be attributed to Elon Musk's political activism, the Chinese are less concerned with American politics and liberal ideology , and they buy Chinese cars because they consider them more advanced and much cheaper.
The Australian Electric Vehicle Council also reported Tesla's decline: in February 2025, sales fell by 70% compared to February 2024 . Interestingly, in February 2025, Tesla sales in the UK increased by 20%: Model 3 took second place, and Model Y - third among new cars. Another exception was Canada, where in January of this year, about 8,600 cars were sold in just three days at four Tesla dealerships .
This means that one car was sold every minute , 24 hours a day for three days, even when the stores were closed. This surge in sales came about due to the end of Canada's electric vehicle subsidy program in January, as funds were exhausted earlier than expected. On the weekend before the program closed, Tesla dealerships submitted applications en masse , and the company took more than half of the remaining budget.
Canadian media reports that after this suspicious excitement, hundreds of cars piled up in parking lots , and the Canadian government suspended payments while it investigated possible fraud . Canada's transport minister has banned Tesla from participating in future subsidy programs until the threat of US tariffs against Canada is lifted.
Part of the global sales decline is attributed to customers waiting for the updated Tesla Model Y, which only appeared this month. However, journalists report that the new Model Y is available on Tesla's website for same- day delivery , which does not indicate high demand. Another reason why people might not buy a Tesla—given how quickly parts fall off the Cybertruck, there's not much point in buying one.
If you really want one, you can just start collecting parts on the side of the road, and in about a year you'll be able to put it together yourself . The Cybertruck is in many ways like a children's toy in reverse: you get a fully assembled truck, and after a while all you have left in your garage is a bunch of parts in boxes.
Last week, at a general meeting with Tesla employees, Elon Musk predicted high demand and advised employees to hold their shares. His brother Kimbal, who sits on Tesla's board of directors, sold $27 million worth of shares last month. And chairman Robin Denholm sold $33 million worth of shares, according to regulatory filings .
So, not all employees listen to him. About half of Elon Musk's fortune is tied to SpaceX, which owns Starlink, the dominant satellite internet provider, perhaps thanks to Musk's political connections. This service was installed in the White House, and Trump's Commerce Secretary even lobbied for Starlink to be considered for the US Rural Broadband Internet Access Program .
Reports indicate that the Federal Aviation Administration has been asked to find funding for Starlink, possibly to replace a 15-year, $2.4 billion contract already awarded to Verizon in 2023 to upgrade the communications system. According to the FT, Musk's political activism has also begun to hinder SpaceX's global expansion plans.
Ontario Premier Doug Ford reportedly terminated a $100 million Starlink deal in response to U.S. tariffs on Canada, and Musk's controversial behavior has caused problems for Starlink's rollout in Brazil, Italy, and even his homeland of South Africa. They write that European countries are so concerned about US threats to cut off access to Starlink in Ukraine, a service paid for by Poland, that the EU is offering to fund its own alternative to Starlink for security reasons.
Although news reports suggest that Twitter's value has once again surpassed the $44 billion Elon Musk paid for it in 2022, many investors are skeptical of that valuation as user numbers and advertising revenue have fallen significantly since 2022. The transaction, which valued the business at $45 billion, is the purchase of xAI, another Elon Musk business.
A person who has seen the documents described the reported profit figures to the FT as having been heavily revised . It is not obvious that any third party would pay a similar amount to purchase the 12th most popular social network. This deal is similar to Tesla's purchase of SolarCity in 2016, when Musk merged a company that was losing value with one that was gaining it.
He owned 54% of the artificial intelligence company and used it to buy Twitter, which he owned 80%. Other XAI investors are unlikely to be thrilled about this, as they were investing in a pure AI project that is now burdened by a social network that has lost its relevance. In recent weeks, protests against Musk have been taking place at Tesla showrooms around the world .
There have even been cases of vandalism of Tesla cars and charging stations by protesters. Politico reports that Musk's role in government, his provocative tweets, his spread of far-right propaganda, and his salute at Trump's inauguration have made him a target for anti-Trump sentiment and his products a target for protesters.
The problem is not only in the protests. A recent survey in the UK found that 70% of Tesla owners are ashamed of their car. This doesn't necessarily mean they have any strong feelings for Elon Musk, it's just that driving a Tesla makes others think they're Musk fans, and that confuses them. Most people just want to own a car, not make a political statement out of it.
According to Joseph Spak of UBS, while many American consumers support DOGE government spending cuts, Musk may be alienating the very US consumers who are most likely to buy Tesla. He notes that among high- income consumers who plan to buy an electric car in the future, Tesla now ranks lower compared to its competitors than it did a year ago.
NPR reports that the Tesla brand has grown significantly in popularity among Republicans and conservatives in the US, but liberals, moderates and independent voters, whom Musk is alienating, are more likely to choose an electric car. They note that the towing problems of electric vehicles could be critical for Republicans, who are much more likely to buy pickup trucks and use cars for work.
The new fans that Elon Musk is gaining may love him, but they don't want to buy an electric car. So is Elon Musk's business really in trouble, or is it just a temporary setback? Well, a few years ago, Tesla investors were pushing the idea that we were on the path to a 100% electric future and that Tesla had no competitors in this niche.
This justified in their eyes that Tesla was worth more than all other automakers combined. Today, the idea that cars with internal combustion engines and hybrids will disappear is much more questionable. In addition, Tesla faces serious competition from both traditional automakers and new players from China, who may be ahead of Tesla in terms of technology.
BYD recently introduced a new fast- charging technology that adds 250 miles of range in five minutes, which is significantly faster than Tesla and more convenient than conventional cars. Tesla recently announced it had received approval for a simplified Chinese version of its Autopilot software, which costs about $9,000 per car, sending shares soaring.
But its main Chinese competitor , BYD, has released its own software for full autopilot at no additional cost. The Tesla software alone costs as much as the cheapest BYD car. For investors, Tesla shares have long been a " dead weight." Although investors rejoiced in December 2020 when the stock was added to the S&P 500 index, it has not risen since then, while the index itself has nearly doubled.
A few weeks ago, Barron's said the company didn't deserve a spot in the "Magnificent Seven"—a group of high- growth stocks. Unlike others, Tesla is an overvalued and volatile stock, built on hopes for the future rather than dominance in the present. It's hard to predict the consequences of Trump's trade wars, but for countries looking to retaliate, imposing tariffs on Tesla and canceling Starlink subscriptions is an obvious answer.
Although Trump's new tariffs will hit Tesla, like other automakers, since 30-40% of parts are imported, analysts believe that competitors will be hit harder , and Tesla will win in the US market. Of course, we should expect retaliatory steps , and Tesla still sells most of its cars abroad. Evaluating Elon Musk's business projects has become much more difficult after his intervention in politics, because now everything depends on the changing political landscape.
For example, what will happen to this business if Trump's friendship with Musk ends? Although the US government's spending cuts under Musk are proceeding at a rapid pace, the Washington Post noted that Musk himself is one of the biggest beneficiaries of government support. They report that Musk's companies have received at least $38 billion in government contracts, loans, subsidies, and tax breaks.
US government support has been ongoing for over 20 years, but almost two- thirds of the funds have been allocated in the last 5 years. Most of it fell during Biden's presidency. Last year alone, federal and local governments gave Musk's companies at least $6.3 billion, the largest amount to date, according to data.
While that number could rise thanks to Musk's connections in the US government, it could fall just as quickly if Trump and Musk fall out. Today, Tesla is still valued at about 100 times projected earnings, significantly more expensive than other automakers, indicating that investors are pinning their hopes on new technological breakthroughs and rapid growth.
And we'll have to wait and see how it ends. If you liked today's video, you should also watch my video about the most ridiculous megaprojects. Don't forget to visit our sponsor, Delete Me, via the link in the description below. Have a good day, see you in the next video. Goodbye.
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