The SpaceX IPO Is About to Lift Off at $1.77 Trillion. Here's My Honest Take on Whether You Should Buy Shares.
Key Points
The SpaceX IPO is reportedly well oversubscribed, which should lead it to hit its IPO price target.
Revenue will grow quickly in 2026, but it is still unclear how good this business model is.
Shares are coming out at an expensive valuation, which should keep investors away from buying.
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The SpaceX IPO is coming on Friday, June 12. According to Reuters, despite the massive $75 billion capital raise, the IPO is expected to be 4 times oversubscribed, with over $250 billion in investor dollars seeking to participate. It just goes to show how many people believe in Elon Musk's vision for spaceflight and artificial intelligence (AI).
This almost cinches the IPO going through at its proposed price of $1.77 trillion, and it could mean a large pop on the first day of trading as well. But does that mean you should pile into the stock along with the rest of Wall Street? Here's my honest take on the SpaceX IPO.
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Massive growth, but at what cost?
SpaceX's revenue grew 33% year over year in 2025 to $18.7 billion. This is mainly driven by its Starlink satellite internet service, which is now generating up to $11.4 billion in annual revenue and is highly profitable.
It is likely that Starlink continues on its upward trajectory in 2026. However, there will be an even faster-growing segment at SpaceX this year: AI compute sales. SpaceX is selling access to its Colossus data centers, built by xAI, to both Anthropic and Alphabet in monthly contracts worth a combined $2.16 billion, or $26 billion annually. That is more than its entire 2025 revenue, suggesting we could see the business begin to post 100% annual revenue growth in the near future.
Where concerns start to arise with these AI deals is that xAI and SpaceX are unable to meet compute demand from their internal services, such as Grok and X (formerly Twitter), for which these data centers were originally built. Reselling computing infrastructure to third parties may look good now, but it will likely come with ultrathin profit margins, and both Anthropic and Alphabet can walk away from the deal whenever they want. This raises questions about the quality of SpaceX's AI compute revenue for anyone looking to invest in this business over the long term.
Image source: Getty Images.
An impressive vision does not mean a great business
There is no denying that Elon Musk and the rest of SpaceX have a grand vision for this business. There are even compensation hurdles for Musk based on whether the company establishes a colony on Mars.
Where some investors may get overly excited is correlating these grand visions to a highly profitable business. SpaceX's launch business dominates headlines but generates only $4 billion in revenue annually and is not profitable. The AI segment lost $6 billion in 2025 compared to just $3.2 billion in revenue, although that may change with the aforementioned Anthropic and Alphabet contracts.
Sure, Starlink looks solidly profitable, but SpaceX as a whole is capital-intensive, has negative free cash flow, and has future endeavors like Starship and orbital data centers that will be costly as well. This doesn't scream out that this will be a highly profitable business delivering value to shareholders.
My honest take on the SpaceX IPO
SpaceX is undoubtedly an exciting company. I am rooting for it to succeed in its goals. The world will be better for it.
But when talking about whether I would buy the stock? That is a different question. This is a business that may burn cash for years to come and is riding on ambitious assumptions about its rocket engineering and orbital data centers to drive growth over the next decade.
Plus, the IPO price puts SpaceX stock at a stratospheric valuation. A $1.77 trillion market cap at the IPO gives it a price-to-sales ratio (P/S) of close to 100 compared to 2025 revenue, which is going to create an impossible hurdle for investors to overcome. Even if revenue can 10x to $200 billion within a few years, the slim margins for a space flight business would give SpaceX stock an ultra-high price-to-earnings ratio (P/E).
A risky business model coming out at a crazy high price. My honest take is that any investor should avoid buying the SpaceX IPO, even if it pops on day one.
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Brett Schafer 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.
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