History Shows IPO Stocks Plunge Up to 48% Within 1 Year of Going Public. Here's Why SpaceX Could Defy the Odds in 2027.

Between its reusable rockets, Starlink satellite internet network, and growing artificial intelligence (AI) infrastructure business, Space Exploration Technologies (NASDAQ: SPCX) is pursuing a host of opportunities that extend beyond space exploration.

While this may seem enticing from an investment perspective, investors should understand that buying IPO stocks comes with considerable risks. According to a study from LPL Financial examining nearly 1,500 initial public offerings (IPOs) over 30 years, IPO stocks experienced a median drawdown of up to 48% during their first year of trading. This does not mean the average IPO finished its first year down 48%. The median one-year return was actually negative 4.7%, illustrating just how volatile new public companies can be.

Nevertheless, the research raises an interesting question: Could SpaceX experience a similar decline in 2027? While that's definitely a possibility, I see several catalysts that could help the company defy historical trends.

Connectivity is becoming SpaceX's hidden gem

Although SpaceX is best known for launching rockets, Starlink is becoming one of its most important growth engines. At the end of September, the service boasted 13.6 million consumer subscribers, representing 89% growth year over year. SpaceX's connectivity segment generated $5.2 billion in revenue during the third quarter, up 69% from the prior-year period. Operating income nearly doubled to $2.4 billion.

What most investors may be overlooking is how Starlink's addressable market is expanding. SpaceX has established aviation relationships with companies including United Airlines, American Airlines, Southwest Airlines, and Virgin Atlantic. Meanwhile, Starlink Mobile is aiming to bring wireless spectrum and connectivity to areas that lack coverage from incumbent telecommunications providers.

Beyond commercial customers, SpaceX has been awarded roughly $6 billion in multiyear government contracts associated with Starshield, its national security platform. Taken together, these opportunities provide SpaceX with several ways to accelerate revenue without relying exclusively on its rocket launch cadence.

Image source: Getty Images.

Watch out for AI infrastructure

Through its Colossus data centers, SpaceX also provides access to accelerated computing systems used to train and develop generative AI models. One of its most important customers is Anthropic, the company behind the Claude chatbot.

According to Anthropic's S-1 filing, the company entered into a capacity agreement with SpaceXAI to access compute powered by Nvidia GPUs. Per the terms of this arrangement, Anthropic agreed to spend up to $120.5 billion over the lifetime of the contract, which ends in 2029.

SpaceX also has a cloud services agreement with Alphabet involving approximately 110,000 Nvidia GPUs. That contract calls for payments of $920 million per month, equivalent to another $11 billion in annualized revenue.

Interestingly, CEO Elon Musk recently said that SpaceX secured $40 billion in debt for additional GPUs. While borrowing such an enormous amount of money might initially concern investors, the arrangement could prove strategically valuable in the long run. If the company can maintain strong utilization rates for its AI infrastructure and command enough revenue from this compute, bringing on additional capacity could actually generate meaningful AI-driven growth down the road.

A merger with Tesla could be well received

There's another development that could influence SpaceX's stock price in 2027. SpaceX and Tesla (NASDAQ: TSLA) are formally evaluating a potential combination. According to regulatory filings, both companies have established special committees to assess the possibility of a merger.

The combined company would bring Tesla's electric vehicles (EVs), robotics, energy storage systems, and autonomous driving technology under the same roof as SpaceX's satellite infrastructure, AI computing capacity, and aerospace capabilities.

The rationale is that Tesla's growing interest in autonomous driving systems and robotics could benefit from SpaceX's computing infrastructure. Meanwhile, SpaceX would gain deeper opportunities to integrate its tech stack across Tesla's ecosystem.

An all-stock transaction allows the companies to merge without requiring an enormous cash payment. However, such a deal does not automatically create shareholder value. Investors would need to consider the exchange ratio, dilution, potential conflicts of interest with corporate governance, and whether the combined company's businesses would be accretive operating together. For now, a merger remains speculation rather than a certainty.

Will SpaceX stock soar in 2027?

SpaceX's diversified business model could help it outperform the typical newly public company. Starlink is generating meaningful operating profits, AI infrastructure agreements are accelerating and becoming a major revenue stream, and a potential combination with Tesla adds an interesting layer to the long-term thesis.

With that said, investors shouldn't assume that strong business performance guarantees positive stock returns. SpaceX's valuation, capital expenditures (capex), and ability to convert revenue into recurring free cash flow will ultimately determine where the stock goes.

At the end of the day, I think SpaceX could avoid the usual sell-offs that have historically affected IPO stocks, but investors should still remain disciplined about the price they are willing to pay.

Adam Spatacco has positions in Alphabet, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Tesla. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.