Morgan Stanley says SpaceX at $100 would give its AI business no value

Morgan Stanley (NYSE: MS) says SpaceX (NASDAQ: SPCX) is getting close to a price where investors would be giving its artificial intelligence unit no value at present.

The bank’s entire case is based on the possibility that the price falls to $100 per share, which is the number that most traders consider after the selling opportunity for insiders opens up. According to analyst Adam Jonas, at this price, the AI segment of the firm will not be valued at all.

The stock has already had a rough start. SpaceX raised a record $86 billion when it went public in mid-June at $135 a share.

There was a rush among the buyers initially, leading to an increase in the price by almost 50 percent over three sessions to over $225. This euphoria soon fizzled out. The stock has since fallen below the issue price and is now trading at $110.85, 18 percent lower than the issue price.

Morgan Stanley ties most of its SpaceX target to artificial intelligence

Jonas kept a $300 price target on SpaceX, and more than half of that figure comes from the AI business. He wrote on Friday, “We believe the current disconnect between increasingly bearish investor sentiment and largely unchanged fundamentals creates an attractive entry point in SpaceX shares.”

His note said many investors are bracing for a drop when the lockup ends next month. The company plans to hold its first earnings call on August 4. Two days later, on August 6, insiders will be allowed to sell up to 911.5 million shares.

That would roughly double the number of shares available for trading and could add more pressure if early holders decide to cash out.

Jonas said the market is cutting the value of Grok and Cursor. He wrote, “Most investors we speak with significantly discount Grok & Cursor.” He added, “Many ascribe zero or even negative value for AI given the high capex requirements relative to Space & Connectivity, largely uncertain economics, and the high degree of management time devoted to the business.”

That concern is not limited to SpaceX. Investors have been selling technology names that plan to pour hundreds of billions of dollars into AI chips, data centers, power, networks, and other support systems.

Higher oil prices have added another problem. Tensions between the United States and Iran have raised inflation fears while an uncertain economy has made traders less willing to hold risky assets, including crypto and high-growth stocks.

Wall Street still leans strongly bullish. Bloomberg data shows almost 80% of analysts covering SpaceX rate it as a buy. The average target is about $232, which is more than twice recent levels.

Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), Citigroup (NYSE: C), and JPMorgan Chase (NYSE: JPM) all gave the stock buy-level ratings after helping Morgan Stanley lead the IPO. Jonas is among the biggest bulls, with the third-highest target out of 33 analysts.

Tesla’s losses add pressure as Musk delays major product plans

The mood around Elon Musk’s companies changed within weeks. One month after the SpaceX listing made him the world’s first trillionaire, investors started focusing on the cost of his promises.

SpaceX has lost more than $1 trillion from its peak. Even so, its $1.57 trillion value and Tesla’s $1.26 trillion value keep both among America’s largest public companies.

Tesla (NASDAQ: TSLA) faced its own punishment. The electric vehicle company missed earnings expectations, reported negative cash flow for the first time in two years, and fell 14.5% on Thursday. That drop erased about $215 billion from its value.

The results fed wider fears that technology companies are spending too much on AI before the returns are clear.

During Tesla’s earnings call, Elon pulled back earlier timelines for the Robotaxi service, the Optimus humanoid robot, and the long-delayed electric Semi truck.

Investors had been paying extra for ambitious plans at both companies, based on Tesla’s position in electric vehicles and SpaceX’s rocket-launch business.

Supporters say Elon spots markets before they fully exist. Elon has said he wants both firms to become major AI players, even though they are still chasing companies that entered earlier.

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