Elon Musk's Tesla and SpaceX Have Shed $1.19 Trillion in Value Since June. Is This a Buying Opportunity?

If you're a contrarian investor looking to pick up companies at a bargain price, then this may be a good time to consider Elon Musk and his trillion-dollar enterprises. Both Tesla (NASDAQ: TSLA) and Space Exploration Technologies (NASDAQ: SPCX) have been struggling in recent weeks, with Tesla falling nearly 20% since June 19 and SpaceX falling by 40%.

SpaceX has been the big loser, losing nearly $1 trillion in market cap in the last six weeks, while Tesla has lost $220 billion. Musk's companies have gone from a collective capitalization of $3.94 trillion to $2.75 trillion.

Data source: Companiesmarketcap.com.

So, is it time to make a contrarian bet? As with most things in investing, it depends on what your goals are, and how much more you're willing to accept in losses before either of these companies bounces back.

Image source: The Motley Fool.

SpaceX and Tesla will be bumpy

The challenges for Tesla and SpaceX center on the build-out and acceleration of artificial intelligence. Both companies have extremely ambitious goals, and they have to spend billions and borrow even more just to have a chance of achieving them.

Tesla announced that its capex doubled sequentially in the second quarter, and the company is planning for $25 billion in capex this year while borrowing $30 billion. Tesla stock fell 18% the week after its report, marking the company's worst since 2022.

Tesla's AI spending is heavily focused on its Optimus robot line, which Elon Musk hopes to begin selling on the commercial market next year. But mass production at the company's Fremont, California, factory hasn't yet begun, and it's far from a certainty that Musk's bet on his so-called "robot army" will pay off. Tesla is also working to perfect full self-driving technology for its vehicles, hoping regulators will approve unsupervised full self-driving cars at some point.

SpaceX's challenges are even bigger. The company has identified a total addressable market of $26.5 trillion in artificial intelligence and hopes to build orbital data centers that would power AI enterprise applications.

But doing so means going deeply into debt. Goldman Sachs, the lead underwriter for SpaceX's IPO, has projected that SpaceX will have a negative free cash flow of $105 billion in 2029 before rebounding to a positive FCF of $72 billion by 2031.

And remember, IPO stocks are notoriously volatile, particularly as their lockup periods expire. SpaceX has an unusual lockup period. Rather than waiting 180 days before insiders sell their shares, the company allows investors to sell up to 20% of their stock two days after its first quarterly earnings report. That means as many as 912 million shares of SpaceX stock -- more than double the current available supply -- could potentially hit the market as early as Aug. 6.

Is this a good time to buy Tesla and SpaceX on the dip?

If you're a long-term investor who thinks that Tesla and SpaceX can achieve their lofty goals, then it's really never a bad time to accumulate shares. But you should be aware that both companies face challenging quarters ahead. If you're a Tesla or SpaceX bull, be sure to keep your shares as part of a well-balanced portfolio to reach your goals.

Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Tesla. The Motley Fool has a disclosure policy.