The SpaceX IPO Could Trigger a Massive Rotation Across AI Stocks. Here's Why.

SpaceX (NASDAQ: SPCX), the aerospace and AI company founded by Elon Musk, went public on June 12 with a valuation of $1.77 trillion, making it the biggest IPO in history. As of this writing, it's worth $2.59 trillion -- making it the world's fourth-most-valuable company.

At that market cap, SpaceX trades at 139 times its 2025 revenue. That valuation is arguably too high for an unprofitable company that grew its revenue by 33% in 2025. SpaceX's Starlink division is profitable, but its space and AI divisions aren't. Its planned investments in those two unprofitable segments will likely keep its bottom line in the red for the foreseeable future.

Image source: Getty Images.

I believe it's only a matter of time before that bubble pops and SpaceX's valuations drop to more sustainable levels. But until that happens, the buying frenzy in SpaceX's shares could pull investors away from the market's top-performing AI stocks.

Why would SpaceX's IPO impact AI stocks?

Before SpaceX went public, many AI stocks had already generated multibagger gains. Over the past five years, Nvidia's (NASDAQ: NVDA) stock skyrocketed about 1,060%, while Broadcom's (NASDAQ: AVGO) stock surged more than 750%.

Both chipmakers profited from the surging demand for AI chips in data centers. Nvidia dominated the data center GPU market, while Broadcom sold more custom application-specific integrated circuits (ASICs) to hyperscalers. Analysts expect both companies to generate high double-digit revenue and earnings growth for the foreseeable future.

But over the past month, Nvidia and Broadcom have declined 7% and 8%, respectively. Other AI heavyweights, including Amazon and Alphabet, experienced similar declines. That selling pressure strongly suggests that investors took some profits in their high-flying AI stocks to raise more cash to buy SpaceX.

What could happen if SpaceX's stock crashes?

SpaceX's IPO clearly sucked a lot of oxygen out of the AI market. So if SpaceX's stock stumbles, some investors might assume that cash will flow back to the AI leaders.

That could certainly happen, but SpaceX's sell-off could also trigger a broader sell-off in growth stocks as investors rotate back toward more conservative investments. If that happens, it might make Nvidia, Broadcom, Amazon, and Alphabet -- which already look reasonably valued relative to their long-term growth potential -- even more compelling buys.

SpaceX's fate will also set the tone for other big upcoming AI IPOs, such as OpenAI and Anthropic. If SpaceX can maintain its sky-high valuations for at least a few months, those IPOs could also debut at frothy valuations. But if SpaceX's stock collapses and drops below its IPO price, those AI companies could price their IPOs more conservatively. There's also a strong chance that SpaceX's early investors will sell their shares to invest in OpenAI and Anthropic -- which would trigger another volatile rotation across the AI sector.

Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.