SpaceX's IPO could be a real problem for Tesla

That's a funny way to describe a $1.2 trillion company, but Tesla's increasingly feeling like it's playing second fiddle to SpaceX.

Musk's space company, which houses his AI startup, xAI, is eyeing a historic IPO that could value it at up to $2 trillion.

(He's also got a court case against Sam Altman to worry about, but that's another story entirely.)

Meanwhile, the excitement around Tesla, which reports earnings this afternoon, is considerably less. The stock is down nearly 12% this year as Musk keeps pitching the world's most valuable car company as anything but a car company.

From robots to robotaxis, Musk's vision for Tesla's future is very AI-focused. And it's discontinuing some car models to make room for those bets.

Some progress is being made -- robotaxi service just came to Dallas -- but it's not yet bringing in meaningful revenue.

Tesla's pivot is difficult to execute in the best of circumstances, let alone when your boss has an even bigger company he's preparing to take public.

Musk's attention isn't the only thing Tesla is vying for.

The bigger risk: investors jumping ship from Tesla to SpaceX. After all, a good chunk of Tesla investors (potentially even the majority) are more interested in backing Musk than the actual company.

SpaceX represents a new way to do this, with the added benefit of being a company not in the middle of a major transformation.

That doesn't mean SpaceX is a safe bet. Shooting rockets into space is a risky, expensive, and unforgiving business. And xAI's organizational structure has been in a constant state of flux, with all of Musk's cofounders having now departed.

Recently, Tesla has also seen renewed interest from retail investors, according to data from Vanda Research, which is Musk's bread and butter. As crazy as this sounds, Tesla could be viewed as more of a value play (compared to SpaceX) for investors looking to invest in the Muskonomy.

Still, investors love a good story. And it doesn't get much better than a space company with its eye on Mars that's on the cusp of one of the biggest IPOs.