Elon Musk’s Space Exploration Technologies (SPCX +19.17%), known as SpaceX, went public on Friday, June 12. The rocket and satellite company priced its initial public offering (IPO) at $135 per share. With about 13.1 billion shares outstanding, that gave SpaceX an initial market value of nearly $1.8 trillion, making it the largest IPO in history.
Yet some Wall Street experts think SpaceX will blast past Nvidia‘s current market value of $4.9 trillion. CNBC’s Jim Cramer says the company could quickly hit $6 trillion, and hedge fund billionaire Ron Baron says SpaceX could eventually be worth $14 trillion.
Here’s what investors should know.
Image source: Getty Images.
Jim Cramer says SpaceX stock could hit $6 trillion due to mismatched supply and demand
SpaceX has an unusually small float, less than 5%, which means an abnormally small portion of total shares outstanding is currently available for public trading. For context, most Nasdaq-100 stocks have floats that exceed 80%.
Meanwhile, institutional and retail investors are eager to own SpaceX shares, and recent changes to the Nasdaq-100 will make the stock eligible for inclusion in just 15 trading days. Previously, companies had to be listed for at least one year and required a float of at least 10%. But the one-year rule has been amended to 15 days for large companies, and the 10% minimum float rule has been eliminated.
This means there are very few SpaceX shares available for trading, but there is also massive demand, not only from institutional and retail investors, but also (potentially) from index funds that track the Nasdaq-100. Jim Cramer thinks that mismatch could drive SpaceX’s market valuation to $6 trillion.
Space Exploration Technologies
Today’s Change
(19.17%) $25.88
Current Price
$160.88
Key Data Points
Market Cap
$2.1T
Day’s Range
$149.80 – $176.50
52wk Range
$135.00 – $176.52
Volume
15.4M
Avg Vol
261.1M
Ron Baron says SpaceX stock could hit $14 trillion as orbital AI data centers drive revenue growth
SpaceX is uniquely positioned to revolutionize the artificial intelligence (AI) infrastructure industry through vertical integration, enabling orbital data centers (i.e., data centers in space). No other company brings together the necessary launch capacity, satellite connectivity, and supercomputing expertise.
- SpaceX’s Starship system is a fully and rapidly reusable spacecraft that will reduce the cost to reach orbit by 99% compared to the historical average.
- SpaceX’s Starlink operates the largest broadband satellite constellation, with about 10,000 satellites in low-Earth orbit and plans to expand to 1 million data center satellites.
- SpaceX subsidiary xAI was the first company to deploy a coherent gigawatt-scale AI training cluster, and its Colossus systems are the largest AI training clusters on Earth.
Orbital data centers sound like science fiction, and the concept certainly raises questions: How fast could AI servers in space be repaired or upgraded? How would the infrastructure be protected from cosmic radiation? However, CEO Elon Musk says orbital data centers are the only practical solution to the power and cooling constraints that plague terrestrial data centers.
SpaceX’s registration statement (Form S-1) states:
The total cost of operating data centers is heavily influenced by energy, cooling, and distribution requirements. In orbit, chips are expected to be powered by solar energy, which is low cost and unlimited, and we expect to leverage radiative cooling architectures, which incur no operating costs compared to liquid or air cooling.
SpaceX says it will start deploying orbital AI compute satellites as early as 2028. Billionaire Ron Barron believes that will translate into massive subscriber growth for Starlink, pushing revenue toward $1 trillion within a decade. In turn, he believes SpaceX’s market value will reach $14 trillion in about 10 years.
Is SpaceX stock a buy?
SpaceX is an intriguing company with grand ambitions that range from interplanetary travel to orbital data centers, but large IPOs have historically underperformed their initial valuations. In fact, since listing shares, the 10 biggest U.S. IPOs in history (by market value at the IPO price) have underperformed the S&P 500 (^GSPC +0.50%) by an average of 100 percentage points.
In other words, investors have historically been better off purchasing shares of an S&P 500 index fund rather than participating in large IPOs. Only time will tell if SpaceX falls into that category, but I think investors should avoid the stock for now. Large IPO stocks often decline during their first year on the market, and SpaceX went public at an absurdly expensive valuation of 92 times sales.
For context, Palantir Technologies currently has the highest valuation in the S&P 500 at 60 times sales. SpaceX was about 50% more expensive at its IPO price. That seems unsustainable.
But investors should keep the stock on their watch lists. More attractive buying opportunities may arise over the next 24 months.
