My Warning to SPCX Investors - Here's What You Need to Know
Summary
Daniel states that the current market is highly bifurcated, with significant hype around certain stocks contrasting with overlooked fundamentally sound businesses. He focuses extensively on SpaceX's IPO, echoing the critical views of investor Steve Eisman.
Daniel argues that SpaceX's prospectus reads like science fiction, focusing on futuristic concepts like asteroid mining and space colonization to generate excitement, leading to an extremely high valuation (nearly $3 trillion) based on decades-away success rather than current fundamentals. He points out SpaceX's significant capital intensity, particularly in its AI business (Grok and the X platform), which he believes is not yet paying off. He also agrees with Eisman that Large Language Models (LLMs) are becoming commoditized, leading to a race where differentiation, moats, and long-term pricing power are lacking, making the hundreds of billions spent on AI questionable for future profitability. Daniel finds social media projections of SpaceX's revenue ($1 trillion by 2030) and market cap ($90 trillion, implying $7,000 per share) based on extremely high price-to-sales multiples (90x, or even "conservative" 20-30x) to be "insane" and unrealistic for a capital-intensive business.
Furthermore, Daniel explains the current market mechanics driving SpaceX's volatile price movements. Only 5% of SpaceX's shares are currently in circulation (float), while 95% are locked up by insiders who cannot sell. This creates an artificial scarcity, where high demand from the public for limited shares drives the price up disproportionately. He warns of a "huge wall of potential sellers" entering the market as lockup dates (August 11th, August 21st, November 9th, December 9th) pass, which could lead to increased selling pressure and reduced volatility. He concludes that SpaceX is a "very, very risky stock" and he is choosing to "sit out" rather than buy or short it.
Daniel also discusses Tesla, aligning with Eisman's view that its potential merger with SpaceX would be undesirable for SpaceX shareholders. He notes that Tesla's EV business is struggling, with falling earnings, flat revenue, and declining gross profits, facing intense competition, especially from cheaper Chinese EVs. He contends that Tesla is valued not as a car company but as a high-growth software, robotics, AI, and energy company, meaning investors are already paying for future product success that might not materialize as profitably as anticipated, leading to significant risk. Consequently, Daniel is not invested in Tesla due to its momentum-driven, hype-based valuation.
In contrast to these speculative investments, Daniel focuses on "fundamentally sound businesses that the market is continuing to ignore." He explicitly states his investment in "infrastructure layer" companies like Amazon and TSMC, viewing them as "utilities for AI." He seeks high-quality businesses trading at "very low multiples," some even lower than during the 2020 stock market crash, presenting long-term opportunities.
Mentioned Stocks
Reasoning: Daniel explicitly states he has "chosen to invest in kind of the infrastructure layer, like Amazon and Tasmeem," which he recently shared on his channel. He views these companies as "the actual infrastructure for artificial intelligence" and "the utility for AI," rather than model companies. He seeks fundamentally sound businesses that the market is currently ignoring, trading for "very low multiples," some even lower than during the 2020 stock market crash, representing long-term opportunities.
Reasoning: Daniel explicitly states he has "chosen to invest in kind of the infrastructure layer, like Amazon and Tasmeem," which he recently shared on his channel. He views these companies as "the actual infrastructure for artificial intelligence" and "the utility for AI," rather than model companies. He seeks fundamentally sound businesses that the market is currently ignoring, trading for "very low multiples," some even lower than during the 2020 stock market crash, representing long-term opportunities.
Reasoning: Daniel believes SpaceX's valuation, close to $3 trillion, is purely driven by momentum and hype, with its prospectus reading like science fiction (e.g., asteroid mining, space colonization) designed to excite investors about decades-away potential. He agrees with Steve Eisman that the business is extremely capital intensive, especially in its AI division (Grok, X platform), which he doubts is paying off. He also highlights the commoditization of LLMs, implying a lack of long-term differentiation and pricing power despite massive capex. Daniel points to social media posts projecting unrealistic revenue ($1 trillion by 2030) and market cap ($90 trillion) based on absurdly high price-to-sales multiples. Furthermore, he explains that the current stock price rise is mechanically driven by only 5% of shares being in circulation, with 95% held by locked-up insiders, creating artificial scarcity and high demand for limited supply. He anticipates significant selling pressure when these lockups expire (August 11th, August 21st, November 9th, December 9th). Daniel considers it a "very, very risky stock" and chooses to "sit out" rather than invest.
Reasoning: Daniel is not participating in Tesla, aligning with Steve Eisman's view that merging Tesla into SpaceX would be detrimental to SpaceX shareholders. He notes that Tesla's EV business is struggling, with falling earnings, flat revenue, and declining gross profits, facing intense competition from cheaper EVs, particularly from China. Daniel argues that Tesla is valued as a highly profitable software, robotics, AI, and energy company, rather than a car manufacturer. This means investors are paying today for significant future product success, which introduces high risk if those products do not achieve the expected profitability. He characterizes Tesla's valuation as momentum-driven and based on hype generated by Elon Musk, with the "future story" always appearing decades away.