The hype is off the charts. Every bank client, uncle and aunt is being pitched to help make Elon the world’s first trillionaire. The BIG Three Hypes – SpaceX, OpenAI and Anthropic — are all growing fast, but loosing money hand over fist.
The stock buybacks have turned in stock selling, viz. Google and Meta.
With secondaries and hot hypes — the first one coming being SpaceX — the market is about to suck up gigantic amounts of money. It got some of its money from Friday’s huge sell-off. Where will it get the rest?
More selling?
Figure also we have a “hot” economy – Friday’s job report was hot. And the Fed is likely to raise rates – despite President Trump’s new guy. Higher interest rates hit all borrowers – including tech companies that are borrowing to build data centers, make more custom chips (Google, Amazon, Meta, etc.)
So more selling? I figure a few more days of falling stocks.
Is this now a bear market? Like the dot com bust? Hardly. In those days many of the new companies that sucked up capital also went also went bust. Some really terrible ideas – like Pets.com, Webvan, eToys.com, Kozmo.com — but they also had hype from the new exploding Internet.
I know. In early 2000, I started a magazine called Technology Investor. By November of that year, it went bust.
Now it’s different. The hype is out of this world — literally.
For a taste, watch this video of JPMorgan Chase’s CEO Jamie Dimon interview with Elon. There’s even a cameo appearance by Elon’s mother who calls him a “genius.”
Now to the big question: Should you and I buy shares in SpaceX at $135 before the official listing? We can. According to Saturday’s New York Times, Fidelity said it would facilitate purchases of SpaceX’s I.P.O. for customers with at least $2,000 in a retail brokerage account, less than it usually requires for public offerings.
The New York Times piece is here.
Where do I stand? Will I buy shares in SpaceX?
In today’s AI world, the obvious answer was to have a little conversation with Gemini. Here are some excerpts from that midnight conversation:
Harry: Do you have any basic financial overview information on SpaceX?
SpaceX confidential data became significantly clearer following its landmark S-1 IPO filing. The company is preparing for a massive public debut with a target valuation between $1.67 trillion and $2+ trillion, aiming to raise $50 billion to $80 billion.
The financial data highlights a massive shift in SpaceX’s identity: it has evolved from a pure rocket-launch company into a conglomerate heavily fueled by satellite internet and artificial intelligence infrastructure following its official merger with xAI.
Headline Financials (FY 2025)
Consolidated Revenue: $18.7 billion (up roughly 33%-43% year-over-year from 2024).
Adjusted EBITDA: $6.58 billion, showing strong underlying operational cash flow.
GAAP Net Loss: $4.9 billion. Despite massive revenue, heavy spending on capital expenditures (Capex), R&D, and structural integrations keeps the company in the red.
Balance Sheet: Ended Q1 2026 with roughly $15.9 billion in cash against $30 billion in total debt (including a $20 billion bridge loan related to AI infrastructure that matures shortly after the IPO).
Segment Breakdown
SpaceX’s business is divided into three core reporting segments:
1. Connectivity (Starlink) – 61% of 2025 Revenue
Starlink is officially the primary economic engine and the only profitable segment of the company.
2025 Revenue: $11.4 billion
Operating Profit: $4.4 billion
Subscribers: Surpassed 10.3 million active customers in Q1 2026.
Strategy Shift: Average Revenue Per User (ARPU) dropped over the last few years (down to $66/month in Q1 2026) as SpaceX prioritized global volume over high margins. However, price hikes implemented in mid-2026 signal a pivot toward monetizing that massive installed base.
2. Space (Launch & Starship) – 22% of 2025 Revenue
While SpaceX dominates the global launch market, this segment acts as a loss-leader due to aggressive development cycles.
2025 Revenue: $4.1 billion (up a modest 8% year-over-year).
Operational Reality: SpaceX completed an incredible 165 Falcon 9 launches in 2025, but nearly three-quarters of those flights were used internally to deploy Starlink satellites, meaning they didn’t generate outside commercial revenue. High development costs for Starship keep this division loss-making for now.
3. Artificial Intelligence (xAI/Grok) – 17% of 2025 Revenue
Formed under the SpaceX corporate umbrella, this segment is highly capital-intensive.
2025 Operating Loss: $6.35 billion * Infrastructure & Capex: AI swallowed 61% of group capital expenditure in 2025 (accelerating to 76% in Q1 2026) to build out massive data centers and compute clusters.
Commercial Upside: The segment is building third-party revenue streams, including a massive compute-rental deal with Anthropic valued at $1.25 billion a month running through mid-2029.
Investor Outlook: Analysts from firms like Morningstar note that while Starlink’s high operating leverage will likely drive immense future profitability, SpaceX’s aggressive capital spending on next-gen rockets and AI data centers means it will continue to burn through multi-billion-dollar cash reserves quickly.
Gemini: Are you looking at SpaceX from the perspective of an upcoming IPO investment, or are you more curious about how their internal segments subsidize one another?
Harry: I’m asking from the perspective of making an investment in the IPO.
Gemini: Analyzing SpaceX from an IPO investment perspective shifts the focus from their cool factor to fundamental valuation, capital efficiency, and structural risk. Because SpaceX filed its public S-1 Registration Statement on May 20, 2026, ahead of its targeted June 12 listing under the ticker SPCX, retail investors finally have hard data to evaluate.
Evaluating SpaceX as a potential addition to your portfolio requires analyzing several critical financial realities, valuation gaps, and structural risks.
The Valuation Disconnect: $1.7T vs. $780B
The most critical factor for an IPO investor is the massive spread between what the company wants and what institutional analysts say it is worth.
The IPO Target: SpaceX is targeting a pre-money valuation of roughly $1.67 trillion to $2 trillion. If achieved, it will instantly become one of the most valuable publicly traded entities on Earth, generating more exit value than all venture-backed IPOs of the last decade combined.
The Independent Reality Check: Institutional equity analysts at Morningstar issued a pre-IPO valuation of $780 billion-about 48% below the target IPO price.
Investor Takeaway: Wall Street is warning that the IPO is priced for absolute, multi-decade perfection. Morningstar explicitly noted that the company appears significantly overvalued at the target IPO price, suggesting retail investors might find much more attractive entry points if the stock cools down post-listing.
The xAI Merger: Subsidies and AI Risk
The S-1 pulled back the curtain on a massive structural shift: the February 2026 retroactive consolidation of Elon Musk’s xAI (and the underlying X platform) into SpaceX.
The Cash Cow: Starlink is incredibly healthy. It brought in $11.3 billion in 2025 (a 50% jump) with a highly impressive $4.4 billion in operating income (a 39% margin).
The Cash Burn: That massive Starlink profit is completely eaten up by the AI segment, which posted a $6.35 billion operating loss in 2025.
The Infrastructure Trap: AI consumed 61% of SpaceX’s entire capital expenditure in 2025, accelerating to a staggering 76% in Q1 2026. This money is going toward building a gigawatt-scale data center (Colossus) and trying to commercialize orbital data centers using Starship.
Investor Takeaway: You are not buying a pure aerospace and satellite internet company. As an IPO investor, you are buying a mature, highly profitable satellite business that is actively being used to subsidize a highly speculative, incredibly expensive AI arms race.
Governance and The “Musk Premium”
The corporate structure detailed in the S-1 presents a unique governance profile that conservative investors typically approach with caution:
Dual-Class Shares: The IPO offers Class A Common Stock (1 vote per share). Class B shares hold 10 votes per share.
Absolute Control: The filing explicitly states that Class B shareholders are entitled to elect a majority of the board. Elon Musk is the only individual or entity holding a greater than 5% stake in the company.
Key-Man Risk: The entire financial architecture of the company relies heavily on cross-company deals. For instance, SpaceX’s AI wing survives partly on a massive compute-rental deal with Anthropic, alongside internal synergies across Musk’s ecosystem.
Investment Summary Matrix
Metric Bull Case Bear / Caution Case
Starlink Growth Compounding rapidly; targeting 45% of a $1.6T addressable global broadband market by 2035. ARPU dropped to $66/mo recently; price hikes needed to maintain growth could stall volume.
Launch Dominance Completed 165 Falcon 9 launches in 2025; Starship will vastly lower the cost per kg to orbit. ~75% of launches are internal (Starlink), meaning the core rocket business acts as a loss-leader.
AI Integration A path to building orbital data centers; $1.25B/month compute-rental revenue via Anthropic through 2029. Heavy Capex drag; $6.35B AI operating loss drags consolidated GAAP net income into a $4.9B deficit.
Pricing Buying into a generational, moat-protected mega-cap with unprecedented momentum. The target $1.7T+ valuation leaves almost no margin for error or execution delays.
Gemini: Given that the pricing and first day of trading are anticipated around June 12, 2026, are you leaning toward trying to get an allocation through a broker pre-listing, or are you designing a strategy to wait for the post-IPO lockup period to expire in late 2026?
Harry: Can you provide me “Evaluating SpaceX as a potential addition to your portfolio requires analyzing several critical financial realities, valuation gaps, and structural risks.”
Gemini: Here is that specific excerpt for your review:
“Evaluating SpaceX as a potential addition to your portfolio requires analyzing several critical financial realities, valuation gaps, and structural risks.”
Let me know if you need me to expand on any of those specific sections-like the valuation gap or the structural risks-as you plan out your investment strategy!
Harry: Can you do an overview of the valuation gap?
Gemini: The valuation gap surrounding the SpaceX IPO represents a massive $1 trillion disconnect between what the company is asking public investors to pay and what independent institutional analysts say the business is actually worth today.
As the company prepares for its Nasdaq debut under the ticker SPCX, this valuation gap is the single most critical factor for an IPO investor to understand.
The Two Sides of the Disconnect
The gap is framed by two wildly different numbers:
The IPO Target ($1.75 Trillion – $2.0+ Trillion): Elon Musk and the underwriting syndicate (led by Morgan Stanley, Goldman Sachs, and JPMorgan) are pricing the IPO aggressively. They are valuing SpaceX not as a traditional company, but as an all-encompassing, generational tech conglomerate spanning aerospace, telecom, defense, cloud, and AI infrastructure.
The Institutional Reality Check ($780 Billion): Morningstar initiated coverage on SpaceX with a fair-value estimate of $780 billion. This independent appraisal is roughly 55% to 60% below the company’s target public pricing, signaling that the IPO leaves almost zero margin of safety for retail buyers.
Deconstructing the Gap: Why is the Disconnect So Huge?
The $1 trillion chasm exists because Wall Street analysts and SpaceX management view the company’s three core pillars through entirely different lenses.
1. The Core Moat vs. Growth Limits (Launch & Starlink)
The Bull Case ($1.2+ Trillion implicit value): SpaceX dominates global launch (165 flights in 2025) and Starlink generated an incredible $11.3 billion in 2025 revenue. Backers argue Starlink will capture 45% of a massive $1.6 trillion global broadband addressable market by 2035.
The Morningstar Reality ($611 Billion): Analysts agree SpaceX has a powerful “narrow economic moat” due to reusable rockets. However, they cap the fair value of Launch and Starlink combined at $611 billion. The restraint comes from operational realities: ~75% of SpaceX’s launches are internal (deploying Starlink), meaning the core rocket division serves largely as a loss-leader, while Starlink faces capacity constraints, regulatory hurdles, and falling global ARPU (down to $66/month in Q1 2026).
2. The AI Integration: A “Moonshot” vs. a “Cash Burn Trap”
The biggest driver of the valuation gap is how the market prices the recent consolidation of xAI (including Grok and the X platform) into SpaceX.
The Bull Case: Proponents argue that merging xAI with SpaceX builds a revolutionary foundation for orbital data centers, powered by Starlink and launched cheaply by Starship. They point to commercial traction, like a massive $1.25 billion/month compute-rental deal with Anthropic.
The Morningstar Reality ($170 Billion): Analysts used a strict probability-weighted framework to evaluate the unproven AI segment, valuing it at just $170 billion. They broke the probabilities down like this:
50% Probability (Base Case): Moderate growth, high capital costs.
43% Probability (“No Go” Failure Scenario): High risk of a failure that could destroy over $81 billion in value. They cite unproven orbital computing technology and the fact that the AI segment posted a staggering $6.35 billion operating loss in 2025, completely swallowing Starlink’s $4.4 billion profit.
7% Probability (“Moonshot” Scenario): A mere 7% chance that the space-based AI data center concept achieves its full $1.3 trillion potential.
The “Musk Premium” and Retail Supply Dynamics
If the independent valuation is under $800 billion, why is the IPO expected to successfully price closer to $1.8 trillion?
Extreme Scarcity: SpaceX’s S-1 indicates that only about 3% of total shares are being floated publicly to raise its target capital ($50B to $80B).
Unprecedented Retail Demand: The underwriting team has allocated up to 30% of the IPO to retail investors-roughly triple the standard allocation for an offering of this scale.
Because initial supply is incredibly tight and global enthusiasm is high, analysts note that the stock could easily experience a massive short-term “pop” or trade at a heavy premium out of the gate.
Investor Takeaway: The Post-IPO Hazard
Institutional analysts are explicitly warning that the IPO is priced for absolute, multi-decade perfection. Morningstar equity analyst Nicolas Owens noted:
“We believe the company has been significantly overvalued, and investors will have opportunities to buy the stock at more attractive levels after the IPO.”
While the stock might soar early on due to limited initial float and potential rapid inclusion into major indexes like the Nasdaq-100, the real test will come in late 2026. Once the post-IPO lockup periods expire and employee/early-investor shares flood the market, the stock will likely re-rate based on hard quarterly financials rather than hype, potentially closing that $1 trillion gap the hard way.
Harry’s Final Conclusion
Watch the video. It’s amazing.
Buy a few shares. But not with food, rent or mortgage money — money you can’t afford to lose.
Whatever happens, you’ll have a great story to tell your grandchildren. About data centers on the moon and in space About how little of the sun’s energy we use, so far. And all the other things Elon is talking about, which I don’t understand. How our lives are about to become, I can only imagine.
Two days before Elon’s SpaceX IPO, I turn 84.
I wish I were 24. The next 60 years are going to be oodles of fun.
Tell your kids and grandkids to watch the YouTube video above.
I’m psyched. — Harry Newton
