Sometime about 20 years ago we all got used to the idea of companies not having to actually make money on their business operations and I worry the bill for this is coming due soon
It would appear that the relative tax inefficiency of dividends over buy backs (and lack of wealth taxes) has fundamentally messed up the business world.
What's the proposed link here? Wealth taxes don't seem to incentivize the creation of profit. If anything it's the reverse: business owners are incentivized to keep ploughing profits back into the company because it reduces the apparent value of the firm if it's not profitable.
The article says they had $5B in losses (half of which was -$2.5B for xAI) but also just signed a $15B/yr contract with Anthropic which would almost double their revenue
Anthropic is profitable only if you carry forward the discounts they get for the first two months of this deal. That's why they're specifically talking about Q2. They start having to pay $1.6B/mo to SpaceX in July.
True but they're still committed to providing the compute they're getting from SpaceX to their clients.
The cynic in me says this is a numbers game by Elon and Dario to screw up Sam's IPO, along with SpaceX's filing (using the individuals' names rather than the companies because I also think this has become damagingly personal to the players involved).
Is that not the commonly cited example for commodity trading, whereas meaningful comparison of fundamentals to market capitalization only started much later?
Hum... I've been out of stocks for a long while...
Is a price to sales ratio of 100 anything near normal nowadays?
EDIT: Wow, that was easy to find out. Turns out that didn't explode with the everything bubble, and almost no industry in the S&P 500 has an average above 5, the highest being a bit over 8.
Apart from Palantir and Tesla, the other big companies are trading at what would historically be considered reasonable P/Es given their growth rates and profitability.
What's really changed in the last 20-30 years is the incredible profit generated by the tech industry, and the defensive moats the biggest companies have built.
X and xAI are also bad investments. Starlink is plausibly this valuable, but only if China doesn't clone all the parts and sell the same idea to much of the world, at a minimum forcing down margins and possibly undercutting entirely.
So this entire scam is just dumping on retail investors and forcing everyone to prop up a weak company through our 401ks. There should be jail time for people involved.
A lot of people believe in Musk and will invest in anything he wants to do. Is this rational? It depends on how it plays out.
I think we may be seeing a new type of capitalism that maybe Steve Jobs and Warren Buffet hinted at: A business empire built around the outsized ambitions of a single charismatic individual. The valuations of Tesla and SpaceX only make sense if you attach an enormous premium to Musk the individual.
I hate semantic arguments but have a thought. I don't think "charismatic" is the right word. Musk is more vilified than celebrated. He's like a human traffic accident, an amoral black hole of social media attention. I am not sure the English language has a word for this.