Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk has firmly denied rumors that the electric vehicle maker is planning to sell its Chinese operations to facilitate a merger with Space Exploration Technologies Corp. (SpaceX). Musk characterized reports published by The Wall Street Journal regarding the potential sale as "absurdly fake news," aiming to quell speculation that had circulated through financial markets this week.

The denial comes amidst heightened scrutiny of Tesla’s valuation and strategic direction. Investor Gary Black reiterated his stance that Tesla shares are significantly overpriced, assigning a fair value of $312 per share. Black criticized bullish investors for failing to compare valuation metrics against price, warning that such an approach leads to overpaying for companies like Tesla. This skepticism is echoed by Ross Gerber of Gerber Kawasaki, who questioned Tesla’s investment in humanoid robots, noting that no revenue is expected from the Optimus project anytime soon due to the technical challenges of replicating human physical capabilities.

Geopolitical and Competitive Risks

The controversy over Tesla’s Chinese business unfolds against a backdrop of deteriorating US-China relations. The Trump administration’s recent restrictions on foreign-made humanoid robots have drawn sharp criticism from Chinese authorities, who argue the move severely damages bilateral ties. Analysts warn this could harm Tesla’s Optimus ambitions if China retaliates by restricting US companies’ access to its market or limiting exports of rare earth metals essential for manufacturing.

Meanwhile, competition in the robotics sector is intensifying. BYD Co. Ltd. (OTC: BYDDY), a major Chinese rival to Tesla, confirmed that its first humanoid robot will debut in August this year. BYD has been actively investing in Chinese robotics developers and testing machines within its factories, signaling a direct challenge to Tesla’s technological leadership in automation.

Executive Wealth and Market Performance

Amid these operational and geopolitical developments, Elon Musk’s personal wealth has experienced a significant contraction. His net worth plunged from a peak of $1.32 trillion in June to approximately $720 billion, driven by sharp declines in the stock values of both SpaceX and Tesla. SpaceX is scheduled to hold its first earnings call since going public in August, which may provide further clarity on the company’s financial health and market positioning.

What the Numbers Show

The divergence between Tesla’s market valuation and analyst estimates highlights growing investor caution. While Musk defends the company’s strategic integrity by dismissing sale rumors, the simultaneous drop in executive wealth and critical assessments from prominent investors suggest underlying market volatility. The upcoming earnings call from SpaceX and the debut of BYD’s robot will be key indicators of how competitive pressures and geopolitical tensions impact Tesla’s broader ecosystem.

Elon Musk’s net worth has declined by approximately $684 billion from its peak, falling to $684 billion as shares of his flagship companies, Tesla Inc. and Space Exploration Technologies Corp. (SpaceX), retreated amid swirling merger speculation and broader market skepticism. This erosion of wealth, which now exceeds the combined net worth of Larry Page and Jeff Bezos ($549 billion), reflects intensifying pressure on high-growth tech valuations. The decline is primarily attributed to steep drops in the market capitalizations of Tesla and SpaceX, with investors reassessing growth prospects against rising operational costs and competitive threats.

SpaceX Valuation and Merger Speculation

SpaceX stock dropped to $108 on Friday, down sharply from an all-time high of $225. Its market capitalization has plunged from over $3 trillion to $1.4 trillion. Investors are closely watching ahead of SpaceX’s upcoming earnings report, expected next Tuesday. Estimates suggest second-quarter revenue rose to over $6.8 billion, driven by data center revenue from clients including Reflection AI, Alphabet Inc., and Anthropic.

The valuation retreat coincides with reports that Musk is considering merging SpaceX with Tesla, a move that would create one of the largest conglomerates in the US. According to The Wall Street Journal, Musk is reportedly considering selling or spinning off Tesla’s Chinese operations to facilitate the deal. This follows a pattern of consolidation under Musk, who merged X with xAI last year and SpaceX with xAI earlier this year. Additionally, Terafab, a multibillion-dollar semiconductor project in Austin, Texas, is being developed jointly by Tesla, SpaceX, and xAI, with Intel Corp. joining to assist with chip fabrication.

Tesla Margin Compression and Cash Burn

Tesla Inc. shares have plunged 37% from their highest point this year. The sell-off continued after its recent earnings report, which revealed that cash burn accelerated in the second quarter due to ongoing artificial intelligence investments. Gross margins also came short of expectations. Despite double-digit revenue growth reported previously, the company faces narrowing margins and negative free cash flow, raising concerns about liquidity without external financing.

What the Numbers Show

The divergence between revenue growth and profitability metrics highlights the strain on capital-intensive tech models. While SpaceX’s estimated $6.8 billion quarterly revenue indicates strong demand for its data center services, the 38x forward price-to-sales multiple suggests investors are pricing in substantial future growth that faces challenges from competitors like Rocket Lab USA Inc., which recently secured a $266 million Pentagon deal. Similarly, Tesla’s accelerated cash burn despite revenue growth signals that current operations are not generating sufficient liquidity to cover heavy capital expenditures, such as the expected $25 billion in capex for the year. The combined drop in Musk’s net worth underscores the market’s cautious stance on conglomerate structures, contrasting with investor preference for separated entities like General Electric’s recent split into GE Aerospace, GE Healthcare, and GE Vernova.