Could SpaceX Stock Make You a Millionaire? This Is the Simple Answer

After weeks of anticipation, Space Exploration Technologies (NASDAQ: SPCX) pulled off the biggest IPO in market history.

Elon Musk's space company raised $75 billion in its public offering, and the stock soared in its opening days, jumping from an IPO price of $135 to a peak of $225.64, reaching a market cap of nearly $3 trillion.

Since then, the stock has cooled off and has settled in a range of around $150-$160 a share over the last two days. Trading volume and interest remain sky-high more than a week after the IPO. On Tuesday, its lowest-volume day, roughly $20 billion worth of SpaceX stock changed hands.

Though the company is already one of the most valuable in the world, some SpaceX bulls believe the stock can move significantly higher over the long term. Fund manager Ron Baron said that SpaceX could be a $20 trillion or even $30 trillion company by 2040.

SpaceX itself hasn't been shy about making bold predictions, saying its actionable total addressable market is $28.5 trillion, the largest in human history. Most of that is made up of AI enterprise applications, which have yet to be developed.

SpaceX has also identified future markets like point-to-point terrestrial travel, space tourism, in-orbit manufacturing, asteroid mining, and transporting passengers and cargo to the moon and Mars.

Those are a set of opportunities that no other company can claim, and the company also differentiates itself with its mission to "make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars."

Image source: Getty Images.

Can SpaceX make you a millionaire?

With a valuation already at $2 trillion, the upside potential for SpaceX is not as strong as most IPOs. SpaceX can't be Tesla, which went public in 2010 and has since returned 23,000%, turning $1,000 into roughly $230,000, as it accomplished its primary goal of taking electric vehicles mainstream.

With a valuation that's already $2 trillion, SpaceX is up against the law of large numbers. The valuation can't mathematically grow by 230 times because that would make it bigger than the global economy, which currently has a GDP of $123.6 trillion.

The company's addressable market, which seems fanciful, faces a similar obstacle: it's nearly as large as U.S. GDP.

At its current valuation, if SpaceX tripled, it would be the most valuable company in the world, surpassing Nvidia, which is currently worth around $5 trillion. To deliver the kind of returns that would make investors millionaires, in other words, SpaceX would almost certainly have to become the most valuable company in the world by a wide margin.

As tech stocks have become ascendant, the valuation of the most valuable company in the world has increased significantly, jumping from before the financial crisis to more than 10 times its value today.

However, repeating that will be difficult as Nvidia already represents about 8% of the value of the S&P 500, and increasing that percentage won't be easy.

Currently, market concentration in the top tech stocks is unusually high, and the S&P 500 is also near its most expensive level ever, according to metrics like the CAPE ratio.

What it means for SpaceX stock

In order for SpaceX to deliver the kind of returns, 10x or more, that could make ordinary investors millionaires, it would have to become far and away the most valuable company in the world.

I don't think that's impossible, but the company is so far away from executing on the kinds of things it would need to do to accomplish that, like interplanetary travel, that it seems highly unlikely.

Investors looking for millionaire-maker stocks are better off targeting companies with smaller market caps that can 10x without bending the traditional limits of math.

SpaceX did make plenty of millionaires, but it did so in the private markets. By not going public until it reached a valuation of nearly $2 trillion, the company has left a limited opportunity for retail investors.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.