Should You Buy the SpaceX IPO? History Says the Stock Will Make a Big Move in the First Year.

The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) have declined modestly this week as Wall Street prepares for the SpaceX (NASDAQ: SPCX) IPO on Friday, June 12. The event will be historic for multiple reasons: The company will raise a record $75 billion at an unprecedented valuation of $1.77 trillion, making it the largest IPO of all time.

Investment banks involved in the deal report strong demand for SpaceX stock, priced at $135 per share and trading under the ticker SPCX. In fact, the IPO is four times oversubscribed, meaning demand exceeds the number of shares available by a factor of four, according to Reuters.

Should you buy the SpaceX IPO? In the last decade, the average IPO stock gained 25% on the first trading day, but large IPOs have historically dropped sharply during the first year. Here's what you should know.

Image source: The Motley Fool.

SpaceX is uniquely positioned to build and deploy orbital AI data centers

SpaceX (short for Space Exploration Technologies) breaks its business into three operating segments: space, connectivity, and artificial intelligence (AI).

1. Space

SpaceX has revolutionized space travel. In 2015, the Falcon 9 -- the world's first orbital-class rapidly reusable rocket -- successfully landed on Earth after being launched into space. No other company replicated that feat until Blue Origin in 2025. SpaceX aims to further cement its lead with the Starship system.

Starship will be the first fully and rapidly reusable spacecraft. It comprises a reusable first stage (Super Heavy booster) and second stage (the spacecraft), both engineered to return to the launch tower after flight, where they are caught in mid-air by mechanical arms. The company says Starship will reduce launch costs by 99% versus the historical average.

2. Connectivity

SpaceX could revolutionize the internet and mobile industries with Starlink, a constellation of about 10,000 broadband satellites that currently serves about 12 million subscribers. Starlink is already the largest satellite internet service, but it could eventually dominate the broader communications industry.

CEO Elon Musk says the Starlink constellation will ultimately expand tenfold to include more than 100,000 satellites. "If growth continues, Starlink will one day carry the majority of internet traffic. At that point, it is the internet and everything just connects to Starlink."

3. Artificial intelligence

SpaceX recently merged with xAI, an artificial intelligence research lab. The registration statement (Form S-1) states: "We own and operate what we believe to be the largest AI training data center clusters on Earth, including Colossus I and Colossus II." xAI also develops Grok frontier models and enterprise AI applications.

The company recently signed two big deals. It will provide compute capacity to Anthropic for $1.25 billion per month, and it will provide compute capacity to Alphabet's Google for $920 million per month. Those deals are worth $26 billion per year, which represents a material acceleration from the $3.2 billion in sales xAI reported in 2025.

Here's the big picture: SpaceX is unique in its vertical integration. No other company brings together the launch capacity, connectivity technology, and AI infrastructure needed to build and run orbital data centers. Musk believes orbital data centers (i.e., powered by the sun and cooled by space) will solve the energy constraints of terrestrial data centers.

Collectively, SpaceX estimates its total addressable market at $28.5 trillion. That figure includes $370 billion from space mission and launch services, $1.6 trillion from Starlink broadband and mobile services, and $26.5 trillion from AI infrastructure and applications.

History says SpaceX's stock will drop sharply during its first year on the public market

SpaceX will be the largest IPO on record, with an initial market capitalization of $1.77 trillion. That alone is not an issue, but it implies an absurdly expensive valuation. The company reported $19.3 billion in revenue in the past year, bringing its price-to-sales (P/S) ratio to 92.

For context, Palantir Technologies is the most expensive stock in the S&P 500 at 63 times sales. But SpaceX is going public at a valuation 46% higher, leaving plenty of downside risk, especially since large IPOs have historically declined in their first year on the market.

The chart below shows how the 10 largest U.S. IPO stocks (by market value at the IPO price) performed during their first year on the market.

Data source: Barron's, YCharts. The chart shows how the top 10 U.S. IPO stocks performed during their first year on the public market.

As shown above, the 10 largest U.S. IPO stocks declined by an average of 21% during their first year. That may surprise readers, as IPO stocks (especially highly anticipated ones like SpaceX) frequently skyrocket on the first trading day. But they often give back those gains and then some.

More importantly, disappointing post-IPO returns are not limited to a single year for companies that go public with large market caps. The 10 largest U.S. IPO stocks (shown in the chart above) have underperformed the S&P 500 by an average of 99 percentage points since listing shares.

So, should you buy the SpaceX IPO? My answer is no. History suggests the stock could drop sharply in its first year and may underperform the S&P 500 in the long run. That doesn't mean you should forget about SpaceX. Instead, be patient and wait for more attractive buying opportunities.

Trevor Jennewine has positions in Palantir Technologies and Visa. The Motley Fool has positions in and recommends Alphabet, Kenvue, Meta Platforms, Palantir Technologies, Uber Technologies, United Parcel Service, and Visa. The Motley Fool recommends Coinbase Global, Coupang, and General Motors. The Motley Fool has a disclosure policy.