The "Dean of Valuation" Thinks SpaceX Is Worth 28% Less Than Its $1.8 Trillion IPO Price. Here's Why.

With reusable rockets, a growing constellation of satellites providing internet connectivity, and now a major push into artificial intelligence (AI) through xAI, SpaceX is swiftly becoming one of the most inspirational companies at the intersection of technology and space exploration. Some leading Wall Street banks have floated valuations for SpaceX well into the trillions, and CEO Elon Musk agrees: For its initial public offering (IPO) on Friday, SpaceX will list on the Nasdaq at a valuation of $1.8 trillion.

However, valuation expert Aswath Damodaran, a New York University Stern School of Business professor, recently offered a slightly more grounded perspective. Widely known as the "Dean of Valuation" for his transparent financial models and willingness to publish spreadsheet assumptions for public scrutiny, Damodaran has a reputation for sifting through hype narratives with disciplined, data-driven analysis.

Drawing on details from SpaceX's S-1 filing with the Securities and Exchange Commission, Damodaran has concluded that the company is worth $1.3 trillion, about 28% lower than management's IPO price. While that's still an enormous figure, Damodaran's analysis concludes that SpaceX's target price likely rests on some assumptions that may prove overly optimistic.

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Analyzing the realities of SpaceX's business

SpaceX operates three distinct segments: space launch services, Starlink internet connectivity, and AI. For all of its success and engineering achievements, it is still a young company. It remains cash-flow negative and is pouring billions of dollars into capital expenditures for infrastructure projects.

Its prospectus shows that revenue grew 33% in 2025, powered largely by Starlink's subscriber surge. Last year, launch revenue grew at about 8%. Meanwhile, the AI segment added meaningful top-line lift thanks to rising subscriptions to X and the Grok family of generative models.

What does Damodaran's SpaceX model say?

Damodaran's SpaceX valuation model hinges on three pillars:

• SpaceX's total addressable market and how much of that its business segments can realistically capture.
• The operating margins the company can achieve at scale.
• How much capital it will have to reinvest to get there.

The success of SpaceX's AI-driven growth caused Damodaran to raise his long-term AI revenue target to $160 billion, doubling his earlier estimate. With that said, he lowered his forecast for the AI segment's operating margin to 25%, citing persistent competitive pressures and high ongoing capex.

Management's prospectus shows that the company generates strong unit economics in the launch business thanks to Starship's rocket reusability. Moreover, Starlink's satellite-connectivity margins are improving, but are still thin overall. The biggest culprit behind its ongoing operating losses is the capital it is spending on AI computing capacity.

To help offset the margin erosion from AI segment operations, Damodaran lifted the long-term target margin for rocket launches to 45%, justifying that reusability will continue delivering robust unit economics. Lastly, he held Starlink's margins at 60% amid subscriber scaling and improving utilization.

He also incorporates SpaceX's losses into his model, including $2.6 billion in operating losses and a $5 billion net loss overall. Notably, he argues the company's research and development (R&D) expenses should be capitalized. Once these accounting adjustments are made, his estimate for SpaceX's earnings before interest, taxes, and R&D comes to $4 billion.

Ultimately, he calculates SpaceX's enterprise value to be $1.2 trillion, with its equity value rising to $1.3 trillion once the planned $75 billion IPO proceeds are added.

SpaceX IPO investors need a reality check

Damodaran's final verdict is clear: At $1.3 trillion, SpaceX is one of the most valuable companies in the world. But the implied IPO price from Musk clearly embeds assumptions that stretch the company's current capabilities. The gap stems from overly optimistic views of the size of the AI market and an assumption of SpaceX's ability to command premium profit margins amid a landscape of well-funded rivals.

While the rocket-launch and Starlink businesses have both achieved defensible economics, SpaceX's AI ambitions introduce a degree of volatility to the business that I do not think the market is fully pricing in. While valuations are always somewhat narrative-driven for hypergrowth companies, Damodaran's model suggests investors paying the IPO price for this stock are betting on it delivering perfection across every dimension.

History shows this is a rare feat, even for the most visionary enterprises. IPO stocks often pop on their first day of trading, only to crater later as lock-up agreements expire or day traders exit. This pattern was most recently seen in the IPO for AI chip stock Cerebras Systems.

With SpaceX's IPO right around the corner, the story is unquestionably becoming bigger and more volatile than ever before. But in Damodaran's view, the company's true intrinsic value sits well below its target offering price. For retail investors who may be tempted to chase the IPO, I'd recommend patience. It may be best to watch this stock from the sidelines for a while. Those who do buy shares early could end up holding the bag for quite some time.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.