Jim Cramer expressed strong support for investors holding positions in Tesla, Inc. (NASDAQ: TSLA) and Space Exploration Technologies Corp. (NASDAQ: SPCX), arguing that Elon Musk’s forward-thinking approach justifies the investment despite underlying financial headwinds. During his morning appearance on September 3rd, the CNBC host stated, "I don't blame or criticise anyone who's in these stocks. Because this man is well ahead of everybody else in the way he thinks," emphasizing that Musk’s vision often overrides short-term market befuddlement.

Market Context

The defense comes as Tesla faces scrutiny over its transition from an automotive manufacturer to an AI and robotics entity. Cramer aligned with Musk’s characterization of Tesla as a robotics and AI company, a narrative that remains central to the stock's valuation thesis. This stance contrasts with recent quarterly results showing declining profitability, creating a tension between fundamental metrics and growth expectations. Meanwhile, SpaceX, now publicly traded under the ticker SPCX, commands a valuation near $2 trillion, forcing it to deliver on ambitious AI and Starship rocket milestones to satisfy investor demands.

Analysis

For Tesla, the core debate among institutional and retail traders centers on whether current growth trajectories justify the lack of immediate profitability. The company reported a 17.5% annual drop in non-GAAP earnings per share to $0.33 in the second quarter. Operating income fell by 57% to $398 million, with operating margins dipping 270 basis points to 1.4%. Additionally, free cash flow turned negative at $1 billion, raising questions about capital expenditure for AI initiatives, robotics, and ridesharing programs, particularly if autonomy timelines slip or regulatory risks emerge. The near-wipeout of revenue from regulatory credits, previously a pure profit source, further pressures the bottom line. However, bullish sentiment persists due to the 56% annual jump in full self-driving (FSD) subscriptions, which reached 1.48 million, indicating a shift toward margin-heavy software revenue. For SpaceX, the narrative depends even more sharply on growth; while the net loss improved to $541 million from $1 billion a year ago, revenue grew 92% annually. Investors are now watching for lockup expirations in December, which could impact supply and demand dynamics.

Key Numbers

- Tesla non-GAAP EPS: $0.33 (down 17.5% year-over-year)

- Tesla operating income: $398 million (down 57% year-over-year)

- Tesla operating margin: 1.4% (down 270 basis points)

- Tesla free cash flow: Negative $1 billion

- Tesla FSD subscriptions: 1.48 million (up 56% year-over-year)

- SpaceX revenue growth: 92% year-over-year

- SpaceX net loss: $541 million (improved from $1 billion prior year)

- SpaceX valuation: Close to $2 trillion

What to Watch

Traders should monitor the December expiration of SpaceX lockups, which analysts expect could introduce significant supply pressure to SPCX shares. For Tesla, the next earnings report will be critical for assessing whether the negative free cash flow trend continues or if the shift toward FSD software revenue begins to offset automotive margin compression. Market participants will also be watching for any updates on Starship milestones from SpaceX, as the company's near-$2 trillion valuation relies heavily on the successful execution of these ambitious technical goals.