As Elon Musk's SpaceX and Tesla Stocks Continue to Fall, Is It Time to Buy the Stocks on the Dip?

It's been a tough summer for the stocks of Elon Musk-backed Space Exploration Technologies (NASDAQ: SPCX), also known as SpaceX, and Tesla (NASDAQ: TSLA), which have both recently been in free fall. However, despite their dips, I think both stocks have a lot further to fall.

Let's dig into why I think both stocks have considerable downside from here.

SpaceX

After soaring following its June initial public offering (IPO), SpaceX shares quickly reversed course and have been falling ever since. The initial rise in the stock was largely supported by the company selling only a small percentage of its shares at the public debut and by the excitement over Musk's vision for the company's future.

Musk has made some bold claims about SpaceX, saying it will eventually be worth more than Earth itself and that it will develop data centers in space and terrestrial transport. However, these endeavors all have huge technological and other hurdles.

For example, to have data centers in space, SpaceX or another company would need to develop chips that can withstand cosmic radiation, as well as a cooling system that works in the vacuum of space. Meanwhile, terrestrial cargo transport would require building landing infrastructure and having countries like the U.S. and China work together.

With less than $19 billion in revenue in 2025, SpaceX's at-one-time $2 trillion valuation was based more on Musk's vision of the future than the company's current performance. Its StarLink satellite internet service is a nice business, but it serves more as a niche product and is unlikely to ever compete with wireless carriers due to technical limitations in densely populated areas. Meanwhile, its artificial intelligence (AI) and satellite launch businesses are currently losing money.

Morgan Stanley projects that SpaceX won't become free cash flow positive until 2035, which also means the company will have to raise a lot more capital during the next decade to fund these futuristic projects. At 38 times 2026 analyst revenue estimates, the stock is still steeply overvalued given its current business. Meanwhile, the stock will face a big headwind throughout the rest of the year as shareholder lock-ups expire, letting insiders and early investors sell more shares on the open market.

With SpaceX's largely successful recent test flight of Starship doing little to help the shares rally, and no valuation support, the stock has a long way to fall.

Tesla

Like SpaceX, Tesla's valuation is largely predicated on Musk's vision for the company. Its core electric vehicle (EV) business has been struggling. Auto sales fell in 2025, as Musk's foray into politics upset many EV consumers and hurt sales. Meanwhile, the end of CAFE (corporate average fuel economy) penalties in the U.S. removed one of Tesla's biggest appeals, as its high-margin regulatory credit revenue cratered.

Today, much of Tesla's value is tied to its robotaxi and robotics ambitions. However, the company's robotaxis have largely been stuck in neutral, failing to meet Musk's promise of a nationwide fleet by the end of last year. Instead, it has a limited network in Texas and Florida, while rival Waymo, owned by Alphabet, has been expanding aggressively across cities throughout the U.S. Although Tesla's vision-only driverless approach makes sense from a cost standpoint, safety issues surrounding its tech have thus far left it behind.

At the same time, Musk has admitted that scaling its Optimus robots will be difficult. It still faces technical challenges, and there is no supply chain in place, given how new the robots' parts are.

Tesla also has another big project with its Terafab megafoundry, but manufacturing advanced chips is difficult, and even Nvidia Chief Executive Officer Jensen Huang warned Musk that it would be nearly impossible to match Taiwan Semiconductor Manufacturing's capabilities.

Tesla also now faces a SpaceX problem. Before the SpaceX IPO, Tesla was the only way to invest in Musk and his futurist visions, but now the two stocks are competing against each other, and it's been causing them both to lose. With a forward price-to-earnings (P/E) ratio of more than 150, a struggling core business, and future bets that have run into obstacles, Tesla stock has plenty of potential downside.

Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.