Here's Why I'm Avoiding SpaceX Stock After the IPO

Initial public offerings (IPOs) are some of the most exciting events in financial markets because they give regular investors the ability to buy into businesses that were previously out of reach. But investors shouldn't assume every IPO is a good deal. Instead, they should ask questions about timing, management incentives, and stock valuation.

If SpaceX is so great, why are its current owners willing to sell off some of their shares instead of keeping it all to themselves as a private company? And why doesn't management want to go public now, instead of 10 or 20 years ago? These aren't necessarily red flags, but they do warrant some deeper digging for investors considering buying SpaceX stock.

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SpaceX is already too large

Many companies time their IPOs at a relatively early stage in their life cycles. And this makes sense because the public offering gives the young business a boost in the capital it needs to fund its expansion and grow -- while giving new investors ground-floor access to what could eventually become a much larger business. However, with an expected IPO market cap of $2 trillion, SpaceX clearly doesn't fall into this category.

If things go as expected, SpaceX will be the largest IPO in history. The company is also relatively mature. According to data from private market research firm Sacra, its revenue grew by just 18% to $15.5 billion in 2025. While this is a decent number, it represents a sharp deceleration from the growth rates of 51% and 89% reported in 2024 and 2023.

To make matters worse, SpaceX's valuation is also extremely high. The company's expected market cap of $2 trillion would give the stock a price-to-sales (P/S) ratio of 129, which is substantially higher than the S&P 500 average of 3.5. The valuation is also far too high for a company with plateauing growth, and it doesn't leave much room for fundamentals-driven stock price appreciation over the next few years.

Generative AI exposure adds risk

Slowing growth and a high valuation aren't the only challenges SpaceX will face after its IPO. There is also uncertainty about its business direction and long-term strategy. Investors who think they are betting on a space industrial company may be in for a very rude awakening.

In February, SpaceX acquired Elon Musk's artificial intelligence start-up xAI in an all-stock deal worth $250 billion. xAI is known for developing the Grok chatbot, and this move has made SpaceX a major player in the market for large language models (LLMs) alongside companies like OpenAI and Anthropic.

There are several problems with this merger. For starters, the AI business and space are not necessarily related. And it is unclear what synergies will be unlocked by combining the two companies. To make matters worse, generative AI is an extremely speculative industry, so the deal has substantially increased the risk profile of SpaceX as a whole.

According to tech news website The Information, generative AI-related spending caused SpaceX to post a $5 billion loss in 2025. This negative trend probably won't end anytime soon because generative AI still seems to be far from commercial viability. And SpaceX is likely planning to pour much of the funds it raises from the IPO into building out data centers and other AI infrastructure. It is very unclear whether shareholders will benefit from this.

IPOs historically underperform

History tells us that big IPOs usually come with big risks. Research from investment firm Edward Jones has found that these stocks frequently underperform the market over the three to five years following their listing. And with its gargantuan valuation coupled with slowing growth and a risky pivot to AI, SpaceX looks likely to contribute to that statistic.

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