What the SpaceX IPO Means for Starlink's Future

The SpaceX IPO may just be weeks away. The company is reportedly attempting to achieve a $2 trillion valuation, which would allow it to raise upwards of $75 billion in new capital.

Many experts believe the IPO is overhyped and caution retail investors to stay away. Others, however, are salivating at the massive total addressable markets that SpaceX is targeting. According to a recently filed IPO prospectus, SpaceX's management team believes it has "identified the largest actionable total addressable market in human history." In total, the company values its opportunity at an astounding $28.5 trillion -- a figure that seemingly justifies a $2 trillion valuation if it can execute on that potential.

Much of that potential has nothing to do with Starlink, arguably SpaceX's most successful segment historically. Last year, for example, the company's rocket launch segment generated just $4.1 billion in revenue. The company's AI division, meanwhile, generated just $3.2 billion in sales. Starlink, however -- which SpaceX calls its "Connectivity" segment -- racked up $11.4 billion in sales. It was SpaceX's only profitable business.

Looking at SpaceX's prospectus, however, only a small fraction of the company's stated total addressable market deals with Starlink. What exactly, then, will become of this segment? Will other segments like rocket launches and artificial intelligence eventually eclipse the success of Starlink? Digging further into the prospectus, a few clues appear.

Here's what to expect from Starlink after the SpaceX IPO

SpaceX lists two addressable opportunity values for its Starlink division: $870 billion for Starlink Broadband and $740 billion for Starlink Mobile. Starlink Broadband is the company's global internet service, which has already begun scaling. Starlink Mobile, meanwhile, is already working with terrestrial cell service providers to reduce dead spots, but could someday be a stand-alone cell service of its own. According to SpaceX, "Starlink Mobile will become a significant new contributor of Connectivity" in the years to come.

Image source: Getty Images.

While a combined $1.6 trillion addressable market seems lucrative, SpaceX actually believes its Starlink opportunity is just a fraction of its overall addressable opportunity. The company sees a $26.5 trillion addressable market for AI, comprising $2.4 trillion for AI infrastructure, $760 billion for consumer subscriptions, $600 billion for digital advertising, and $22.7 trillion for enterprise applications.

In light of these figures, investors may think that SpaceX's AI division may receive most of management's attention, as well as a disproportionate amount of the company's post-IPO capital.

How SpaceX will allocate its new capital remains speculation. But I would be surprised if Starlink isn't a top priority. The segment is already profitable -- an important division to invest in if SpaceX wants to minimize further shareholder dilution. The growth opportunities with expanding broadband and scaling its mobile segment are also clear and near term.

Still, the race for building AI infrastructure is going gangbusters. Alphabet, for example, recently announced an $80 billion share sale to support scaling its AI infrastructure business. So I expect a huge amount of SpaceX's new capital to go toward these efforts. But Starlink won't be starved for cash. I expect continued investment and scaling of both the broadband and mobile divisions, with more clear real-world traction and profit generation than Starlink's other opportunities.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.