Media reporting raises questions about how Elon Musk REALLY makes money to be the world’s richest person. On December 11, 2024, CNN reported that Elon Musk became the first person to achieve a net worth of $400 billion. This astonishing figure far surpasses the net worth of other billionaires such as Jeff Bezos ($237 billion), Bill Gates ($104 billion), and Mark Zuckerberg ($205 billion). Such an unparalleled financial milestone raises an intriguing question: how does Elon Musk make money? Unlike countries like Saudi Arabia, Russia, or Canada, Musk doesn’t own vast reserves of oil or minerals. Nor is his Wealth locked in a bank or in gold reserves. Instead, his staggering net worth is largely tied to two companies: Tesla and SpaceX. But does this mean that these companies are highly profitable? Does Musk’s net worth stem from dividends paid by these businesses? Ironically, the answer to both questions is a resounding NO. Such a reality raises an important question: how does Elon Musk REALLY make money?
Tesla: Profits or Perception?—shed light on how Elon Musk REALLY makes money
Tesla, Elon Musk’s flagship company, has long been at the center of his wealth. Yet, despite its dominant position in the electric vehicle (EV) market, Tesla has a financial history that challenges its lofty valuation. After 17 years of operation, Tesla reported its first profit in 2020—meager $37 million. As of September 30, 2024, Tesla’s cumulative losses, or retained earnings deficit, amounted to $32.656 billion. Furthermore, Tesla has never distributed dividends to common stockholders. Instead, it has relied on significant subsidies, and incentives from governments worldwide due to its production of zero-emission vehicles.
Tesla’s stock price rising from $14 in June 2019 to $407 in Nov 2021, however, has seen dramatic fluctuations. For instance, upon ramping up, its stock plummeted from $407 on November 5, 2021, to $113 on January 6, 2023, due to increasing competition from Chinese EV makers like BYD. A temporary recovery occurred in July 2023, when Tesla’s stock price rebounded to $281, driven by the 100% tariff imposed by the U.S. government on Chinese EV imports. Yet, by April 2024, Tesla’s stock price had declined to $147, reflecting the continued rise of China’s Innovation edge.
More recently, Tesla’s stock surged to an all-time high of $436 on December 13, 2024, possibly fueled by political factors such as Donald Trump’s appointment of Elon Musk to his administration. Despite this rally, Tesla’s long-term prospects remain uncertain. The development of solid-state battery technology by Toyota and the growing innovation edge of Chinese competitors suggest that Tesla’s dominance may be eroded in the coming years. If history is any guide, Tesla’s stock price—and Musk’s wealth—could face significant risk, much like the decline of Intel, despite the protections afforded by the CHIPS and Science Act.
SpaceX: Ambition vs. Profitability
While Tesla represents one pillar of Elon Musk’s wealth, SpaceX is the other. Founded in 2002, SpaceX achieved its first quarterly profit only in 2023, when it earned a modest $55 million. Prior to this, the company incurred significant losses, including nearly $1 billion in 2021 and more than $500 million in 2022. Despite these financial challenges, SpaceX has achieved remarkable milestones, including reusable rocket technology and partnerships with NASA.
The company’s valuation, however, seems disconnected from its profitability. As of December 11, 2024, SpaceX was valued at $350 billion, with Elon Musk owning a 42% stake. This translates to approximately $147 billion of his net worth. Yet, like Tesla, SpaceX’s valuation relies heavily on perception rather than sustainable financial performance. The commercial space market remains limited, and it’s unclear whether SpaceX can generate the revenue and profit necessary to sustain its lofty valuation over the long term.
Stock Price: determines how rich is Elon Musk and how does he REALLY make money?
Elon Musk’s net worth is not derived from the profits of Tesla or SpaceX. Instead, it is calculated based on his shareholding in these companies and the market price of their stocks. As of July 2024, Musk owned 715 million shares of Tesla. Based on Tesla’s stock price on December 21, 2024, Musk’s net worth from Tesla stock alone was approximately $301 billion. Combined with his stake in SpaceX, Musk’s total net worth from these two companies stood at $446 billion on that date. However, these numbers are highly volatile, fluctuating with changes in stock prices.
The Fragility of Musk’s Wealth
Does Elon Musk’s net worth represent real wealth? Has he created the equivalent value in tangible assets or earnings? The answer is No. Musk’s wealth is largely based on the perception of potential rather than concrete financial metrics. This perception is subject to manipulation and can collapse suddenly due to a lack of proprietary technology edge.
Consider Tesla’s stock price history. Its dramatic fluctuations—rising due to government tariffs and falling due to competitive pressures—demonstrate the fragility of Musk’s wealth. Similarly, SpaceX’s valuation depends on speculative bets about the future of commercial space exploration, a market that remains nascent.
Historical examples illustrate the risks of such speculative valuations. Companies like Byju’s in India, WeWork in the United States, and EV startup Better Place in Israel saw their valuations skyrocket, only to collapse when market realities caught up with them. Tesla and SpaceX could face similar fates if their financial performance fails to justify their current valuations.
The Role of Government Policies
Another critical factor in Musk’s wealth is the role of government policies. Tesla has benefited significantly from subsidies and tariffs designed to support domestic EV production and shield it from foreign competition. For instance, the 100% tariff on Chinese EVs provided temporary relief to Tesla, helping it maintain its market position in the U.S. However, such protectionist measures are not sustainable in the long run, especially as Chinese automakers continue to innovate and dominate the global EV market.
Similarly, SpaceX’s valuation has been bolstered by its government contracts and partnerships. Yet, the company’s reliance on public funding raises questions about its ability to sustain its valuation without continued government support.
Is Elon Musk’s Money-Making Thesis Misleading?
Both Tesla and SpaceX position themselves as disruptors aiming to reinvent their respective industries. Reinvention can indeed generate immense wealth, as demonstrated by companies like Xerox, Microsoft, Sony, and Apple. Consequently, the stock prices of Tesla and SpaceX have soared on the promise of transformation. However, for such reinvention to succeed, it must surpass critical thresholds and secure market dominance.
Tesla, despite its potential, faces significant risks. The EV market shows early signs of saturation due to maturity of battery technology core , raising doubts about sustained growth. Moreover, Tesla lacks a proprietary technology core, a robust R&D foundation, and a strong patent portfolio—key elements necessary to maintain a competitive edge. Its ambition to replicate Apple’s success by transforming automobiles into software-driven platforms has faltered, with its premature claims of full self-driving (FSD) technology mired in bugs, lawsuits, and public skepticism.
SpaceX’s reinvention narrative also has its shortcomings. The reusable rocket technology, while innovative, provides incremental rather than groundbreaking value. Meanwhile, Starlink struggles with cost inefficiencies, bandwidth limitations, and insufficient switching incentives to capture the vast mobile data market.
Overall, Musk’s thesis of wealth creation appears reliant on inflating stock prices through speculative promises of transformative industry disruption. Yet, these promises are undercut by significant technological and market challenges, casting doubt on the sustainability of this approach.
The Future of Elon Musk’s Wealth
Elon Musk’s wealth is a reflection of creating investor confidence in the potential of Tesla and SpaceX rather than the actual financial performance of these companies. As competition intensifies in the EV market and the commercial space sector, maintaining this confidence will become increasingly challenging.
For Tesla, the rise of Chinese EV makers like BYD and the development of Breakthrough technologies by competitors such as Toyota pose significant threats. For SpaceX, the limited size of the commercial space market and the high cost of operations make its valuation precarious. Without significant improvements in profitability, the lofty valuations of both companies are unlikely to be sustainable.
Conclusion
Elon Musk’s status as the world’s richest person, with a net worth of $400 billion, is a testament to the power of perception and speculation in today’s financial markets. However, this wealth is far from guaranteed due to lack of fuel to win waves of Creative Destruction. The volatility of Tesla’s stock price, the uncertain future of SpaceX, lack of non-replicable proprietary technology, and the growing competition in both industries suggest that Musk’s net worth is more fragile than it appears.
While Musk has undoubtedly created a sense of revolutionizing industries and inspired millions, his wealth is built on the promise of wrong thesis guided future success rather than the reality of current profitability. As history has shown with companies like Byju’s and WeWork, such promises can quickly unravel. The key question for Elon Musk’s future is whether Tesla and SpaceX can transform their perceived potential into sustained financial performance—and whether Musk’s wealth can endure the inevitable challenges ahead. Furthermore, such an approach of showing wealth risks weakening the host country’s technology innovation foundation.
Key takeaways about how does Elon Musk REALLY make money?
- Elon Musk’s Wealth is Tied to Stock Valuations, Not Company Profits
- Musk’s $400 billion net worth is primarily based on his shareholding in Tesla and SpaceX, whose valuations are driven by market perception rather than sustained profitability. Tesla has a cumulative loss of $32.656 billion, and SpaceX achieved its first modest profit only in 2023.
- Market Perception, Not Real Wealth
- Musk’s wealth reflects the speculative potential of Tesla and SpaceX, making it highly volatile. For instance, Tesla’s stock price has fluctuated dramatically due to competition, innovation trends, and government policies, highlighting the fragility of such valuations.
- Tesla’s Dependence on External Factors
- Tesla’s stock price has benefited from U.S. tariffs on Chinese EVs and subsidies for zero-emission vehicles. However, its competitive edge is waning due to innovation from companies like BYD and Toyota, raising doubts about its long-term sustainability.
- SpaceX’s Valuation Faces Market Limitations
- Despite its achievements, SpaceX operates in a niche commercial space market with limited revenue potential. Its $350 billion valuation appears disconnected from financial performance, relying heavily on government contracts and speculative growth projections.
- Wealth at Risk of Collapse
- Elon Musk’s net worth is not guaranteed. The risks of stock price collapses, similar to cases like Byju’s and WeWork, loom over Tesla and SpaceX. Long-term survival depends on turning speculative potential into tangible, profitable business models.
Research questions about how does Elon Musk REALLY make money
- How sustainable are Tesla’s market advantages in the face of rising competition from Chinese EV makers like BYD and technological advancements by companies like Toyota?
- This question explores Tesla’s ability to maintain its competitive edge amidst growing global innovation in electric vehicles and the development of solid-state battery technologies.
- What role do government subsidies and tariffs play in shaping Tesla’s stock price and market dominance?
- Analyzing how policies such as U.S. tariffs on Chinese EVs and subsidies for zero-emission vehicles impact Tesla’s valuation and overall business sustainability.
- To what extent does SpaceX’s valuation depend on speculative growth versus tangible market opportunities in the commercial space sector?
- Investigates the financial basis of SpaceX’s $350 billion valuation and its reliance on government contracts and speculative future market opportunities.
- What lessons can be drawn from previous valuation collapses (e.g., Byju’s, WeWork) to predict the future trajectory of Tesla and SpaceX?
- Comparing Musk’s companies to historical cases of overvaluation can provide insights into potential risks and strategies for preventing valuation declines.
- How does investor perception influence stock prices, and how can it be manipulated in the context of companies like Tesla and SpaceX?
- Examining the psychological and financial factors that drive investor confidence, particularly in speculative high-growth sectors, and the role of public figures like Elon Musk in shaping market sentiment.
