SpaceX (NSDQ:SPCX) The Most Misunderstood US $2T IPO in Decades

Should you buy SpaceX

SpaceX is becoming one of the most misunderstood IPOs in market history. With a valuation of around US$2.1 trillion and the stock already gaining 19% in the open market, we would caution investors looking to chase SPCX at current levels.

SpaceX reportedly listed at a valuation of US$1.75 trillion, raising more than US$75 billion. To put that into perspective, Saudi Aramco was one of the largest IPOs in history, raising around US$25 billion. The key difference is that Saudi Aramco was already highly profitable at the time of listing.

SpaceX’s current revenue base is around US$18 billion, while the company remains unprofitable and is burning significant cash. In its latest quarter, SpaceX reportedly burned through around US$4 billion, which equates to more than US$1 billion per month.

This is where the IPO risk becomes important. In many high-profile IPOs, early investors and employees enter at much lower seed or private-market prices. The company then lists at a premium valuation, retail investors buy into the excitement, and early holders gain an opportunity to sell into public-market demand.

SpaceX is trading at more than 100 times sales, you are then essentially buying into the premium for years of future profits and revenue. That is arguably the clearest measure of how much future expectation is already priced into the stock. Almost all of the company’s value is being attributed to long-term opportunities across the lunar economy, orbital AI compute, Starlink expansion and entirely new market creation.

The opportunity is enormous, but so is the valuation risk. Investors are not paying for the business SpaceX is today. They are paying for a future version of SpaceX that still needs to be built.

SpaceX business model

Before we look deeper into the cautionary risks of investing in overhyped IPOs, investors first need to understand SpaceX’s business model and revenue streams. That is the only way to properly understand why the company is being valued so far into the future.

SpaceX is essentially three businesses stitched together into one large, vertically integrated conglomerate.

The launch business

The first is launch, which is the foundation of the entire model. Cheap, reusable rockets through Falcon and Starship have driven the cost per kilogram to orbit materially lower, moving the economics closer to the cost of fuel. That capability is what made Starlink possible.

Because SpaceX can launch satellites at a lower cost than competitors, Starlink has been able to build a profitable telecommunications business with global reach and competitive pricing. That business is now generating around US$11.4 billion in revenue and US$7.2 billion in adjusted EBITDA.

XAI, the cash burner

The AI segment has been central to much of the bear case in the analysis we have seen. It is currently unprofitable, generating around US$3.2 billion in revenue while burning through approximately US$1.2 billion in the latest quarter.

However, this is where the debate becomes more interesting. The current AI segment looks weak at face value, but the forward AI compute contracts could change the earnings profile materially. The AI segment is currently showing negative EBITDA of around US$1.2 billion on revenue of roughly US$3.2 billion, most of which appears to be tied to X advertising revenue.

But looking at the forward compute agreements, the Anthropic deal is reportedly worth around US$1.25 billion per month, while the Google deal is around US$920 million per month for compute access. Combined, that represents roughly US$26 billion of annualised run-rate revenue as those contracts ramp between 2026 and 2029.

That compares with the entire 2025 AI segment revenue base of just US$3.2 billion.

The risk, however, is customer concentration and funding quality. A large portion of the future AI value appears tied to a small number of major counterparties, while some of these commitments are being supported by aggressive capital raising through debt markets. That means investors need to separate the scale of the headline backlog from the quality, durability and cash conversion of that backlog.

Merger and the debt refinancing dilemma

Before xAI and X merged, the business was carrying a significant amount of distressed debt, including senior notes with high interest rates, while still operating as an unprofitable company.

The merger with SpaceX changed the funding equation. By combining xAI with Starlink’s profitable revenue base and SpaceX’s stronger balance sheet, the group was able to refinance that stressed debt and access a US$20 billion bridge loan to repay the existing obligations.

According to the filing, the total repayment amount was approximately US$18.9 billion, which included a US$1.16 billion prepayment penalty. In other words, SpaceX paid more than US$1 billion in penalties just to exit those loans early.

This is important because a large portion of the IPO proceeds appears to be going directly toward repaying the bridge loan. The reason this refinancing was needed in the first place is the rapid expansion of AI infrastructure, which is extremely capital intensive.

So while there may be a long-term flywheel effect from combining SpaceX, Starlink and xAI, that strategic upside is coming at a significant near-term cost. Investors need to understand that the AI opportunity is not being added to the business for free. It is increasing the group’s capital intensity, debt burden and execution risk.

The investment dilemma

SpaceX is currently spending around US$20 billion per year, and that figure is likely to keep rising. Importantly, much of this spending is now being directed toward AI infrastructure rather than space exploration alone.

Elon Musk has noted that the current supply of chips only supports around 2% of his long-term vision for AI compute demand. If that is the case, SpaceX and xAI’s need for chips, data centres and power capacity could expand significantly over the coming years.

This means anyone buying SpaceX today is effectively underwriting years of negative free cash flow, rising capital expenditure and growing interest expense. Based on Q1 2026 annualised figures, capex could reach around US$30 billion, while annualised interest expense is already tracking at approximately US$1.9 billion.

The other issue is that xAI does not have a clear first-mover advantage. It is competing directly against extremely well-funded AI players such as Anthropic, OpenAI, Google and Meta, all of which are also raising or deploying enormous amounts of capital into AI infrastructure.

That makes the US$75 billion IPO raise interesting. On the surface, it looks enormous. But when placed against the scale of SpaceX’s AI build-out, debt refinancing needs, chip demand and ongoing negative free cash flow, the question becomes whether even US$75 billion is enough to support the company’s ambitions without requiring further capital raises in the future.

The long-term opportunity may be huge, but the near-term financial burden is just as significant. Investors are not simply buying a space company. They are funding one of the most capital-intensive AI infrastructure build-outs in the world.

The investors’ takeaway for SpaceX

SpaceX’s inclusion in major indices could allow significant passive capital to flow into the company through pension funds, superannuation funds and index-tracking products.

That matters because it creates a natural source of supported demand. For early investors and employees, this can provide the liquidity needed to exit positions at elevated valuations, while retail investors chasing the next major market theme may begin buying into the hype.

We think this could be a mistake at current levels.