We Think the SpaceX IPO Is Overvalued

m-hodges

> Even at $63 per share, we give SpaceX a lot of benefit of the doubt in two of the three scenarios, in which we assume the company can achieve a rapidly reusable Starship rocket enabling multiple launches per week and successfully commercialize data centers in space. > In our downside scenario, orbital data centers won’t work or offer any advantage over terrestrial ones. We surmise that the company, having invested tens of billions to find this out, would cut bait on the project sometime around 2028, the way management walked away from plans to build multiple small-car factories at Tesla.

bayarearefugee

> We Think the SpaceX IPO Is Overvalued Well... yeah, sure, everyone thinks that. And the fact that it doesn't matter and won't impact demand for shares illustrates how increasingly and dangerously untethered the stock market is from reality.

SeanAnderson

Everyone says SpaceX IPO price is too high, but it's the most interesting IPO in a long time, it's critical to the US government, and America is, frankly, addicted to gambling. I'm not convinced it's going anywhere but up for a long while.

p-e-w

If SpaceX is indeed overvalued (which I have no opinion on), it above all else demonstrates how unimportant spaceflight still is. SpaceX has been the only game in town for quite a while now, to such an extent that the intelligence agencies of foreign governments have no alternative but to launch with SpaceX. They now do more orbital launches than the entire rest of the world combined. If they really are worth less than Microsoft, then it seems space just doesn’t matter that much, because SpaceX is space for all practical purposes.

mrcwinn

>However, we assign this scenario, in which both Starship is reusable and scaled orbital data centers are highly successful, a 7% chance of happening I may agree with their overall sentiment, but I think this sort of formulation is just silly nonsense from analysts who build models instead of companies.

hparadiz

I want some shares purely as a novelty. Don't really care about the price. It's not about making money. It's about owning a piece of the future.

oldfuture

And the prospectus says it plainly: "Mr. Musk will be able to control the outcome of matters requiring shareholder approval." Musk holds over 85% voting power through Class B super-voting shares (10 votes/share). Public investors combined will have 15%. What Musk Controls: - CEO removal = his consent. You can't fire him even if he destroys the company - Take business for himself. SpaceX gets a rocket deal? Musk can say "I'll do it at Tesla instead" - 85% voting forever. No expiration, no time limit, permanent control - Board elections. You have no power to elect directors you trust

antonvs

Not a criticism of the article, but... ...from the pages of Duh Magazine

ancorevard

You should beware of the predictive power of Morningstar before you read/take their advice.

jmyeet

From SpaceX's S-! it bases its valuation on the total addressable market of 3 markets, which is made up of: 1. Space operations: $370 billion; 2. Connectivitiy: $1.6 trillion, roughly split between mobile and broadband; and 3. AI: $26.5 trillion, which includes $22.4T in AI Enterprise applications, $2.4T in AI infrastructure, $760B in subscriptions (ie Grok) and $600B in digital advertising. So immediately we see the limits of the space market. SpaceX did 170 launches in 2025. At $100M each, that's $17 billion in revenue and Falcon 9 launches just don't cost that much. That brings Starship into the picture but that program is arleady at $15 billion spent without a single dollar in revenue. So we know from the outset that only the other markets can really justify the STarship prgoram because you have to remember that STarship has to compete with Falcon 9. Or, even worse for SpaceX, a Falcon 9 competitor. Now, as for Starlink, this one is interesting. Starlink has a big advantage when you need mobile broadband (eg planes, boats) as there's nothing really equivalent, Yes, there's 5G and that's fine in populated areas on, say, RVs and such. But the receivers are expensive. I think Starlink is going to have a hard time competing with 5G, mainly because 5G already exists and Starlink handhelds are predicated on STarship being able to launch sufficient low-altitude V3 Starlink satellites, which themselves have a more limited life because they are lower altitude. And you're still going to have to deal with per-country licensing, marketing, regulations, etc. I wonder how much of this is predicated on military applications. But let's get to AI as that's the most hand-wavy (IMHO) of all this. First, digital advertising. Well, when Elon bought Twitter it had $4.5B in ad revenuie. Now it's $1.8B. I also think Twitter is fundamentally limited so that's just not going anywhere. Twitter just isn't 10x'ing it's audience (IMHO). Subscriptions? I think this is a dead market. For everyone. Why? There'll be a race to the bottom, hardware will get cheaper, eventually AI agents will be run locally (even on phones, eventually) and it's just not the cash show OpenAI, SpaceX or Anthropic think it is. Let's also dispense with orbital AI data centers. It's a completely dumb idea. it's going nowhere. Don't believe anyone hyping it up. It makes zero sense and it will never amount to anything. SpaceX seems unable to monetize their AI investments thus far. How do I know this? Because you don't lease DC space and GPUs to Google if you have a better use for them. So it not only looks like you're falling behind but you also need the cash. Also, this is dependent on getting enough GPUs. Published details about the Google deal seems to allow Google to cancel or revise the deal if SpaceX is unable to deliver so there is a huge risk here. What none of these companies (SpaceX, Anthropic, OpenAI) seem to be addressing is what happens when future generations of hardware come out? What happens when running models locally becomes more and more viable? What if there is no expensive hardware moat? What happens when AI models get commoditized? I personally believe this last one will happen and China will make sure it happens. So all in all there are a ton of risks here. I am skeptical about the long-term prospects of OpenAI in particular and Anthropic less so but I think xAI's (ie Grok's) future is way more uncertain. I'm actually most confident in Google's future here because they haven't bet the company's future on AI not imploding.

chvid

My trading app (Nordnet - big in Scandinavia) is plastered with ads for the SpaceX IPO. I don’t think I have ever seen this before.

rpmisms

I'm generally going to avoid betting against Elon.

dash2

I wish Ed Zitron (currently also front page HN) would adopt this calm, measured writing style. It’s much more convincing and shorter to read too.

verandaguy

I need to understand what possible benefit there is to doing DCs in space. The cost would be, no pun intended, fucking astronomical. The cooling situation would make no sense at all -- the major up-and-coming application of DCs, LLM training, has absurd cooling requirements even here on earth where convective cooling is an option, to the point where many DCs use open-loop cooling. Latency might be better, in some cases, I guess, but probably not by some groundbreaking amount. Who is this product for? How the hell did "data centres in space" make it into the prospectus at all? More to the point, why is Morningstar being so generous with their interpretation of that line of business? It's plainly insane, and you don't need an advanced degree in physics to understand why.

Joel_Mckay

Maybe, but his proposed share structure is hilarious. I can't tell if Musk is serious or trolling Wall Street again. =3

6stringmerc

This is the most white collar “we call bullshit” type of writing I’ve seen in a long time and I’m here for it. Not a good sign for the next two AI IPOs either. SpaceX had the hubris to release their S-1 publicly and whatnot. This is going to be “Hot Garbage Summer” in the equities market lmao. GG VCs.

JoshTko

And water is wet

GMoromisato

A lot (everything?) hinges on orbital data centers. If they don't work, SpaceX is overvalued. SpaceX plans to launch 120 kW satellites, each weighing 1.7 tons. Let's be conservative and say it ends up being a 100 kW satellite massing 2 tons. Let's be conservative and say Starship can launch 50 tons to orbit for $20 million ($5 million more than a Falcon 9 launch). 50 kW per ton x $400K per ton = $8,000 per kW = $8 million per megawatt in launch costs. That means a 100 megawatt orbital data center will cost $800 million to launch. You need about 833 satellites for 100 megawatts, so let's round up to 1,000 satellites. Let's say one of these satellites cost $3 million (that's probably high, but let's go with that for now). That's about $3 billion for satellite manufacturing. Bottom line: It will cost SpaceX $4 billion to launch a 100 megawatt data center. Anthropic is paying SpaceX roughly $50 million per megawatt per year. SpaceX could sell access to its data center for $5 billion per year. Assuming the satellites last for 4 years, that's $20 billion in revenue from $4 billion in costs. Please correct my math/assumptions, but this rough calculation shows that SpaceX could be right and Morningstar could be wrong.

mattas

Data centers at the bottom of the ocean make more sense than data centers in space.

Hansenq

You can absolutely level this claim against Tesla too. When deliveries dropped a year ago, the stock price didn't go down. Tesla's stock is disconnected from the fundamentals and every stock investor today knows this. Why would SpaceX be any different? If anything it would be even more disconnected from the fundamentals than Tesla is, given how much more control it gives Elon. SpaceX stock is a bet on Elon, full stop. It has nothing to do with space, data centers, AI, or whatever technology they're currently working on; it's a bet that Elon will figure something out. (and if you need any example of this, just look at Twitter--he engineered an exit for his X shareholders at a higher valuation [at the expense of SpaceX, but a positive exit nonetheless])