SpaceX’s pending IPO reportedly scheduled for June will double Musk’s publicly traded companies, joining Tesla as a target for investors betting on the CEO’s moonshot goals around automation and space exploration. But rather than seeing twice the opportunity to cash in on a Musk-led enterprise, investors and analysts instead see red flags for Tesla stock.

“This cannot be a positive for Tesla,” Joe Gilbert, portfolio manager at Integrity Asset Management, told Bloomberg. “We believe that Musk’s focus will predominantly be lasered on SpaceX. Musk has proved to be able to balance multiple initiatives simultaneously in the past, but it feels like SpaceX is his new baby at the expense of Tesla.”

Tesla has had a difficult year: It saw the company’s first full-year revenue decline in its history last year, and despite improved sales in the first three months of this year, deliveries have fallen below analysts’ expectations, and production has continued to outpace sales.

Tesla did not respond to Fortune’s request for comment.

Though its stock is down about 5% year-to-date, Tesla’s stock trades well above what its fundamental performance reflects, according to analysts. Musk has recently touted Tesla as less of an electric vehicle producer and more of an AI and robotics company, exemplified by his projection that 80% of the company’s total value will be represented in its humanoid Optimus robot, despite no evidence of the project’s scaling, let alone to Musk’s goal of an annual capacity of 1 million robots.

SpaceX tells a different story. Among the stakeholders in conversations about putting data centers in space to scale the growth of AI, SpaceX has already shown promise of strong returns with Starlink, its satellite internet with more than 10 million subscribers, as well as its grip on the global orbital launch market, using reusable rocket boosters. The company’s IPO prospectus reveals a full-year revenue of $18.7 billion in 2025, a 33% year-over-year increase from 2024, but also that its losses are expected to similarly swell as it looks to expand rapidly. With a projected $1.75 trillion valuation, SpaceX would dwarf even Tesla’s $1 trillion worth.

“It’s sexy,” Ross Gerber, a Tesla investor and CEO of investment firm Gerber Kawasaki, told Fortune. “Everybody likes sexy things in the investment business.”

How does SpaceX’s IPO make Tesla’s troubles worse?

SpaceX being the new belle of the ball will only mount pressure on Tesla, according to Dave Mazza, CEO of Roundhill Investments. Investors bought into Tesla in part because of its ambitions around AI and robotics, and SpaceX’s success could undermine Tesla’s vision.

SpaceX’s success will likely depend heavily on Musk’s fanbase because, reportedly, 30% of its IPO may be allocated to retail investors, about three times the usual available for individuals, “pulling directly from the same pool that has been Tesla’s most loyal buyer base,” Mazza said.

“Tesla’s valuation has never been justified by vehicles alone, and investors are paying for the autonomy and physical AI thesis,” Mazza told Fortune. “SpaceX’s IPO sharpens that scrutiny, because investors will now have a cleaner, purer Musk innovation bet to benchmark against, which raises the bar for Tesla to actually deliver.”

Investors like Gilbert are also concerned about Musk’s personal investment of time and energy into Tesla, suggesting a renewed focus on the aerospace company would sap attention from Tesla. The concerns echo those of investors last year, when Musk was a special government employee overseeing the Department of Government Efficiency (DOGE), admitting it was challenging to juggle so many projects, while also alienating a consumer base that has historically leaned to the left and sought after EVs.

Mazza said this risk is present for all of Musk’s projects, however, and isn’t specific to SpaceX’s IPO. If you’re going to invest in a Musk-run company, you are buying with the understanding that he both brings value to the business, while also being largely responsible for its potential demise, he said.

“That concern is already priced in, as Musk’s divided attention has been a headline risk for years,” Mazza said. “The more relevant question is execution: Tesla needs to deliver on robotaxi and autonomy on its own timeline, and SpaceX going public doesn’t change that calculus one way or the other.”

Could SpaceX’s merger help save Tesla?

While SpaceX’s IPO may be bad news for Tesla stock, it could ultimately be good for business, Gerber said. The aerospace company going public has increased speculation of these two companies merging, a move that would grow Musk’s dominion over the AI market. SpaceX already owns Musk’s xAI, and the companies are already working jointly on developing Terafab, a semiconductor plant in East Texas.

A merger would simplify investor decisions to a simple binary, Gerber argued: If you believed in Musk’s vision, you would buy shares, and if you didn’t, you would invest elsewhere. But a merger would also shield Tesla from some investor scrutiny if other components of Musk’s ventures found success, especially as the EV-maker’s promises around full self-driving features have yet to come to fruition.

“This period of time could be very difficult for Tesla, on top of the fact that now you’re throwing out SpaceX,” Gerber said. “In a typical Elon fashion, there’s lots of messiness with all this, and how that all gets reconciled is through a merger.”