Skeptics question whether SpaceX is worth $1.77 trillion
Elon Musk once predicted to private investors that one of his companies would quintuple its revenue to more than $26 billion by 2028 and nearly quintuple its customer base.
That company was Twitter, and those projections were made as Mr. Musk prepared to buy the social media company for $44 billion in 2022.
Today, Twitter, which has been renamed X, has fallen far short of what Mr. Musk said it would. The social media platform’s advertising revenue fell 65 percent last year. And finally this year it was folded into SpaceX, Mr. Musk’s rocket company.
Now, as SpaceX prepares for a sensational initial public offering, Mr. Musk and his investment bankers are peddling even grander propositions about what the rocket and artificial intelligence company will achieve. But those proclamations, along with Mr. Musk’s history of over-promising, have some investors increasingly worried that SpaceX — which could go public for $1.77 trillion — could get burned.
“It really feels like a ‘don’t look at the man behind the curtain’ situation,” said Jim Chanos, founder of the investment firm Chanos and Company, who in 2001 predicted the collapse of Enron, the energy company that was found to be involved in accounting fraud.
Mr. Chanos and others said they were interested in SpaceX’s finances. The company lost $4.3 billion in the first three months of the year alone and is spending heavily on AI development. Revenue was $4.7 billion and growing, but it was far less than tech giants like Meta, which brought in $56.3 billion in the same period and has a $1.4 trillion stock market value.
At the same time, SpaceX has promised that its total addressable market — its revenue opportunity if it captures all demand across industries — is the largest “in human history” at $28.5 trillion. That number, which depends on SpaceX proving it can put AI data centers in space and develop factories on the moon, exceeds China’s annual gross domestic product by more than $8 trillion.
Michael Burry, the hedge fund investor featured in the book “The Big Short” for his predictions about the 2008 financial crisis, said in a Substack discussion last month that any post-IPO increase in SpaceX stock “would be hype and technical stuff.”
“Nothing in that S-1 suggests it’s worth $1 trillion, let alone $2 trillion,” Mr. Burry wrote, referring to the company’s IPO.
Even some SpaceX shareholders have their doubts. Ross Gerber, chief executive of investment firm Gerber Kawasaki, which owns SpaceX stock, said the company’s projections reminded him of the unverified information young startups used to lure investors. He said he was concerned about SpaceX’s likely value of $1.77 trillion, which would be more than four times the $400 billion the company was valued at just 13 months ago.
“Investors are paying an extremely high price for these stocks,” Mr. Gerber said.
A SpaceX spokesperson did not return a request for comment.
SpaceX’s bankers, including Goldman Sachs, which is leading the IPO process, joined the broad projections. Financial Times previously reported that Goldman told a potential investor that it expects SpaceX’s total revenue to reach $474 billion in 2030, up from $18.7 billion last year. Morgan Stanley, which is also working on the IPO, said in an analysis shared with investors that it expects SpaceX to reach $3.4 trillion in revenue by 2040. The Wall Street Journal.
A Goldman spokesman declined to comment. Morgan Stanley did not return a request for comment.
Morningstar, an investment research company, has released more sober analysis. The firm said SpaceX’s IPO price was “overvalued” and that the company was worth around $780 billion. Nicolas Owens, a Morningstar equity researcher, gave SpaceX a 7 percent chance of getting its latest rocket, the Starship, to the point where it could be used over and over again as a regular aircraft, and to prove that AI data centers were cheaper and more efficient than their terrestrial counterparts. In the most optimistic scenario, Mr. Owens said, SpaceX could be valued at $1.97 trillion.
“We’ll know in two to three years if the Starship is reusable or if the GPU rack in space will be viable or offer any cost savings,” he said, referring to the computer chips used to power the AI technology. “But the company is asking everyone to decide on Friday if it’s possible and what it’s worth.”
Mr. Musk has also shown a tendency to change his business goals on the fly, analysts and investors said. It was only last year that he first talked about data centers in space, doubling down on the idea in February after merging SpaceX with his AI company xAI.
In April, SpaceX said it had agreed to acquire Cursor, an artificial intelligence startup that develops coding software, for $60 billion, moving the company into an area it hadn’t previously focused on. Mr Musk, who has spent billions building his own frontier AI models and his Groka chatbot, appears to have recently changed course on further AI plans.
Last month, SpaceX struck a deal with AI start-up Anthropic to provide it with computing power for products not used by Mr Musk’s own AI services. SpaceX then struck a similar deal last week to provide computing power to Google.
SpaceX boosters on Wall Street and social media touted the deals as wins that would generate tens of billions of dollars in revenue. But detractors have pointed to how the company is making significant last-minute changes to its long-term business plans.
“The real excitement should be in developing some new, powerful agent model,” Mr. Chanos said. “But xAI seems to be suddenly changing its business model from developing models like Grok to neocloud,” he said, using an industry term for companies that provide computing power to other AI firms.
“This is critical because the entire valuation depends on the progress of xAI,” Mr. Chanos said, calling the neocloud strategy a “commodity business” that is valued much lower on public markets.
Ultimately, the SpaceX IPO will be a litmus test of investor confidence in Mr. Musk, Mr. Gerber said. Those willing to pay will because Mr. Musk, who previously transformed the auto industry with his Tesla electric car maker, is at the helm of a unique company in SpaceX.
“People are paying a trillion dollars for Elon,” Mr. Gerber said.