TSLA vs SPCX: Which Stock Should You Own?

TSLA vs SPCX: cash in, cash out

0:00 Over the first 9 months of 2026, Tesla brought in about $1.9 billion of free cash flow. And SpaceX burned through about $35 billion. So, the stock that's growing like a rocket is also the one asking you for gas money. And that's not just a rough patch because the Wall Street forecast Barclays cited still have Tesla bringing in about $12 billion of free cash in 2030. While SpaceX is projected to burn another $17 billion that same year. So, if you could only own one, Tesla or SpaceX, which one do you want?

0:26 Now, if you own SpaceX, don't panic yet. The reason that number is so negative might actually be the best part of the bull case. But, if you own Tesla, don't get too comfortable either because Tesla's cash looks a lot less boring once you see what it's being spent on. And at the very end, I'm going to put both of them on a six-category scorecard because one of these stocks wins a category almost nobody would guess. Spoiler, it's not growth. So, let's start with free cash flow.

Free cash flow, explained with a paycheck

0:50 And the easiest way to understand it is think about your own paycheck. Your paycheck comes in, you pay rent and groceries. Then you buy the truck you need for work. And whatever is left after all that is basically your free cash flow. A company works the same way. It's the cash that comes in from running the business minus what it spends on equipment and buildings, which accountants like myself call capital spending. Tesla has money left over. SpaceX bought a really, really big truck.

1:15 In just the September quarter, SpaceX spent about $19.6 billion on equipment.

Where SpaceX's money is going

1:20 And about $16.4 billion of that went into its AI business, which it now calls super intelligence. That's more than SpaceX's entire revenue for the quarter, which came in at about $14.6 billion, up 161% from a year ago. So, yes, it spent more than it made on purpose. I see this as an absolute win. And most of that money is going into computing power, meaning giant data centers full of chips that run Grok, and that SpaceX rents out to other companies for new cloud deals.

1:47 Think of it like building a giant self-storage place out by the highway. You pour all the concrete before the first renter ever shows up. The good news for SpaceX is that the renters are showing up because AI business brought in about 7.6 billion, up from about 800 million a year earlier. And that AI business actually turned an operating profit of a little over $400 after losing more than 1 billion dollars the quarter before. And that's even after about 1.2 billion of stock paid tied to buying the coding company Cursor.

2:15 So the storage units are filling up faster than anyone expected.

SpaceX's 3 businesses

2:20 Now SpaceX is really a rockets business, an internet business, and an AI business stacked together. And the first one is the one everyone pictures, the rockets. SpaceX flew 35 launches in the September quarter, and Starship finally reached orbit for the first time in September, dropping off 26 of the new bigger Starlink satellites. But here's the surprise because the rocket business barely made any money last quarter. It basically broke even since SpaceX is pouring over 1 billion dollars a quarter into research, mostly for Starship.

2:50 The rockets are the famous part. They're not the profitable part. The profitable part is Starlink, the satellite internet business, which had nearly 14 million consumer subscribers at the end of September, up 1.6 million in just one quarter. Starlink's operating profit was up 99% from a year ago to about 2.4 billion in a single quarter. So it's the cash cow that's feeding everything else. Every rocket launch is basically being paid for by someone's home internet bill.

3:13 But there's one Starlink number I keep an eye on because the average consumer subscriber is now paying about $69 a month, down from over $80 a year ago. That's mostly because Starlink is growing in cheaper countries and with cheaper plans, which is fine, but it means each new customer is worth less than the last one. More customers, smaller checks. To push back on that, SpaceX agreed in October to buy a block of wireless spectrum for something it calls Starlink Mobile, which basically just means they want your phone to connect straight to its satellites.

3:40 If that works, Starlink stops being just the internet dish on your roof and starts competing with your cell phone bill, which would be a much bigger market. But the deal isn't expected to close until the first half of 2027. Your phone bill might be next. And the last one is super intelligence. And we're going to be renaming it super intelligence, officially renaming it. And the AI side we already talked about, which is now the biggest of the bunch by revenue.

4:05 SpaceX measures that business in raw computing power, and it went from about 0.6 gigawatts a year ago to about 1.7 gigawatts by the end of September. And a gigawatt is the kind of power you normally measure a power plant in. That's the concrete in the self-storage analogy. And it's growing faster than the revenue right now, which is exactly why the cash flow looks so ugly. So, SpaceX isn't broke. It's just really busy.

The bear case on SpaceX

4:27 But here's the bear case, and it's a real one. Computer chips get old fast, and a data center has to earn its money back before next year's chips make it look like a flip phone. That's the risk with the self-storage place, because a competitor can open a nicer one across the street with cheaper rent. And you're still stuck paying for the concrete. SpaceX can afford to keep building for now, because its IPO in June raised about $86 billion, and it ended September with about 90 billion in cash and investments.

4:51 It also has nearly 40 billion of debt, so it isn't spending only IPO money, it's borrowing, too. Big plans come with a big tab. And remember whose money that IPO cash is, because when a company spends it, it's spending what shareholders paid in. So, SpaceX owners are the ones paying for the concrete, which is fine as long as the renters keep showing up. There's one more thing SpaceX does with its stock that you should know about, because it has been using its shares like a credit card to buy other companies.

Paying with SpaceX stock

5:15 In February, it bought Musk's AI company xAI with stock. And in August, it bought the coding company Cursor at a value of about $60 billion, mostly paid in SpaceX stock and stock awards. Paying with stock doesn't cost SpaceX cash, but it does mean every existing owner now owns a slightly smaller piece of a bigger company. Swiping the stock card still sends a bill, just goes to the shareholders. Now, Tesla looks like the responsible sibling here, but it's not exactly sitting on its savings, either.

Tesla's numbers

5:42 Tesla's revenue last quarter was about $28 billion, basically flat from a year ago, and its operating margin was just 2.6%, which means it kept about 2 and 1/2 cents of operating profit for every dollar of sales. A year ago, that margin was 5.8%, so Tesla's operating profit fell about 56% even though sales didn't move. Its free cash flow also swings around more than you'd think because Tesla burned about 1.1 billion in the June quarter before bringing in about 1.5 billion in September.

6:05 The reason is the same as SpaceX, just smaller because Tesla's pouring billions in a robo-taxis, its Optimus robot, and AI computing. And the business paying for it has flat sales. Same problem, smaller truck. Tesla has actually tapped the brakes a little on that spending because it now expects to spend about 20 billion on the equipment this year, down from the more than 25 billion it was planning earlier. That helps the cash flow this year, but some investors read it as Tesla slowing down the very bets they bought the stock for.

6:32 You can't cheer on the spending cut and the robot army at the same time. To be fair, some of those bets are starting to show up because Tesla's cybercab started giving public rides in Austin in September, and Tesla now has built 10 million vehicles. And Tesla still has about 45 billion in cash and investments, so it isn't in any danger of running out of money. So, Tesla's not broke either, it just has some expensive hobbies. Now, let me give you the Tesla bull case the way a Tesla bull would actually say it because it's stronger than a 2.6 margin makes it sound.

The Tesla bull case

7:00 The argument is that cars are just the part of Tesla you can see today. And the real value is in robo-taxis that make money every hour they drive, and Optimus robots that could do a factory work for years without a paycheck. To your point, once you've got once you've got a robot that can manipulate atoms, can shape objects, the the value of the of the intelligence um becomes exponentially greater uh because it cannot do things. And Tesla has a head start on the boring stuff that makes those work, like millions of cars collecting driving data, and factories that already build things at huge scale.

7:32 The bears' reply is simple. That's a story about the end of this decade, and you're paying for it today while the business you can actually measure is shrinking its profit. Same company, they just disagree about what year it is. And that's the funny part because underneath both companies are making the same giant bet on AI and Musk told Walter Isaacson just how big he thinks that bet is.

Musk's AI bet

7:52 Like my guess is digital superintelligence probably improves the uh output of goods and services by 20 to 30%. Something like that. Call it like a, you know, maybe a 30% increase in uh the the economy of Earth. So, it's still significant. It's like $30 billion a year. And this is just my, you know, my rough guess. Notice he called it a rough guess, which is more humility than most price targets. But even if he's right, a bigger economy doesn't automatically mean bigger profits for the companies building the robots and the data centers because every competitor wants a piece of that money, too.

8:25 A bigger pie doesn't tell you who gets the biggest slice.

Risks you won't see on the chart

8:30 There are also a couple of risks that don't show up on Iver's stock chart. And the first one is that both companies depend on the same guy. Musk runs Tesla and SpaceX at the same time, somehow. And SpaceX also now includes this AI company, and X. So, anytime he gets distracted, both stocks are going to feel it. Both stocks have the same single point of failure. He actually admitted to Isaacson that his year in politics went on too long and pulled him away from his AI work, which is a pretty honest thing for a CEO to say out loud.

8:57 Do you feel that that was too much of a distraction that in retrospect it was misbegotten? I think I I think I I I had it going for too long. The second risk is governments because SpaceX does a huge amount of work for the US government. While Tesla has big operations in China and Barclays flagged that mix as a possible national security headache in any merger. Neither of those is a reason to panic, but they're the kind of risks that don't show up until the day they do.

9:22 And if you're a dividend investor, like dividend grandma, I'll save you some time because neither of these companies pays a dividend at all. Grandma's going to need a different video, which brings us to the part most people skip, the price.

What the stock prices assume

9:35 Because SpaceX sold about half as much as Tesla last quarter and the market still values it about $500 billion higher. Right now, SpaceX is worth about $2 trillion and Tesla is worth about $1.5 trillion. So, you're paying a lot more for every dollar SpaceX sells today. Wojack looks at that 161% and decides SpaceX is the obvious winner. But but the market already knows about the 161%. That's exactly why it costs $2 trillion. So, let's do some really simple math on what those prices are assuming and I want to be clear this is just an illustration, not a forecast.

10:06 Say a big mature company someday trades at 25 times its yearly profit, which is roughly what a lot of large healthy companies trade for. At that multiple, a $2 trillion company would need to earn about $80 billion in profit every year and a $1.5 trillion company would need about $60 billion. Those are enormous numbers. Now, compare that to today because if you just take last quarter's operating profit and multiply it by four, SpaceX is running at about $11 billion a year and Tesla is running at about $2.9 billion.

10:34 That's the gap between the stock price and the reality. So, SpaceX needs to grow its profit roughly seven times to grow into that price and Tesla needs to grow its profit about 20 times. Both are priced for the future. Tesla just needs a bigger miracle. That's not a real reason to sell either one because sometimes the future really does show up, but it tells you how much has to go right before the stock price is cheap. Said another way, a great company only becomes a great investment when the price still leaves you some room to be right.

11:04 You're not buying the growth, you're buying the price tag. And here is the plot twist because you might not get to choose at all since both companies have now set up special committees to look at combining them.

The Tesla-SpaceX merger twist

11:13 Barclays thinks SpaceX would be the buyer in an all stock deal, which basically just means Tesla owners would swap their shares for SpaceX shares instead of getting cash. If you simply add those forecasts together, 12 billion coming in and 17 billion going out, you're still about $5 billion short. So, Tesla's cash wouldn't even cover SpaceX's spending habit. That's just adding to forecast, not a prediction for a merged company, but it tells you which side of the deal would be paying for which.

11:37 Somebody always pays for the concrete, and Musk would come out with even more control because Barclays estimates he'd own under 40% of the combined company, but control about 56% of the votes. For reference, Musk owns about 20% of Tesla today, and he said for years that he wants around 25% to feel comfortable steering where the company goes. A merger would get him past that number without buying a single share. Barclays also pointed out that both companies' boards and shareholders would have to approve any deal, and the regulators would likely look at it closely, partly because SpaceX does so much work for the US government.

12:12 And Tesla's annual meeting is in early December, but there's no merger vote on the ballot. So, anyone telling you a deal is guaranteed by Christmas is guessing. That doesn't make a deal bad for you. Judge it by what you would own afterward, not the headline. So, let's do the scorecard, and I'm scoring six things: growth, profit today, cash flow, balance sheet, price, and control.

The TSLA vs SPCX scorecard

12:32 Growth goes to SpaceX, and it isn't even close because 161% revenue growth against basically flat sales is a knockout. Profit today also goes to SpaceX, and that's the one almost nobody guesses because SpaceX made about 2.8 billion of operating profit last quarter, while Tesla made about 700 million. Cash flow definitely goes to Tesla because Tesla's spending is still mostly covered by its own business, while SpaceX is spending a mountain of IPO money and borrowed money.

12:54 Tesla finally wins one. The balance sheet goes to SpaceX because about 90 billion dollars of cash and investments beats Tesla's 45 billion. Even after you count for SpaceX's bigger pile of debt. Price is a tie that nobody wins because both stocks need years of huge profit growth just to justify where they are at today. And control is the strangest one because it goes to neither stock. It goes to Elon Musk. So, which one would I rather own? Honestly, it depends on which problem you'd rather have.

13:20 If you want a company that mostly pays for its own ambitions today, Tesla is closer, even with that 2.6% margin.

Which stock fits you

13:26 Just know you're also buying a whole lot of faith in robots. If you want the faster growing business and you can handle a company that needs a mountain of money before it pays you back, SpaceX is the bet. But you're paying about $2 trillion up front for it. Neither choice is wrong, pretending that there's no trade-off is. And if you own both, you should know that a merger could turn your two bets into one. So your diversification might be a lot smaller than it actually looks.

13:51 Either way, before you buy, write down the one thing that would make you sell. Like SpaceX's AI sales stalling while the spending keeps climbing, or Tesla's margin sliding back toward the 1.4% it hit in June. Because a thesis with no exit plan is just hope or copium. If you had to own just one of these for the next 5 years, Tesla or SpaceX, which one are you picking and what would make you change your mind? Let me know in the comments. Unlike SpaceX, the algorithm doesn't need 16 billion dollars worth of chips to pick this one.