SpaceX’s otherworldly valuation

Back in the 1990s, during the dot-com boom, tech stock fever gripped investors. There were stories of New York City taxi drivers day trading from their cabs, and in fact I witnessed that personally. The frenzy for internet stocks, most of which were unprofitable, drove the stock market to new heights, and valuation levels never seen before. Of course, the party ended in 2000 when the stock market began a descent that would last until 2002 and wipe out over 50% of its value. The tech-heavy NASDAQ index lost a whopping 78% from its peak.

There are many similarities in today’s market. The latest, and perhaps the most extreme, example is the initial public offering of SpaceX. The company has been trading publicly since June 12, and it rocketed (excuse the pun) to nearly $226 per share from its listing price of $135 before sliding back to around $155. At the current stock price, the company is more valuable than Meta (Facebook), Berkshire Hathaway, Walmart, JPMorgan Chase, and countless other household names. Only five U.S. public companies are worth more: Amazon, NVIDIA, Apple, Alphabet (Google), and Microsoft. SpaceX’s market capitalization (the value of all its shares at their current price) is $2.05 trillion.

Is it really worth that much?

The company has three operating units: Connectivity, which operates Starlink; Space, which includes rocket launches; and AI. Starlink earns over $4 billion annually, but that profit is dwarfed by losses in the other two business units. Total company revenue was $18.7 billion in fiscal year 2025, which resulted in an overall loss of $4.9 billion.

Would you pay almost $2 trillion for a company losing almost $5 billion each year? What if it also had $29 billion worth of debt? Well, maybe if it seemed like profitability was achievable in the not-too-distant future.

Or maybe you’d pay a huge amount of money for a company that was losing money but growing rapidly. That is certainly the case with SpaceX. The IPO prospectus estimates its total addressable market, across business lines, at $28 trillion. So, even with rapid growth in the past (total company revenue was up 33% in 2025), there should still be plenty of runway left if the numbers in the prospectus are to be believed (I wouldn’t). And competitors such as Anthropic and OpenAI have achieved eye-popping growth rates.

That is likely the crux of SpaceX’s valuation. There is a hope that businesses will start to launch more satellites for communication services if launch costs come down. Or businesses may start to build on other planets if that becomes realistic from a cost perspective, resulting in greater rocket launch revenue. Increased volume could reduce unit costs and profitability may emerge. Starlink is already profitable, but there is ample opportunity to grow the subscriber base. The AI offering, called Grok, is currently not among the most successful AI engines, but large language models seem to be playing a game of leapfrog with one another, so there is hope that Grok will take a more dominant market position in the future that allows for greater subscription revenue.

On the other hand, there is still considerable investment needed to build out SpaceX’s businesses. Launching rockets into space is clearly capital intensive. AI models have consumed huge amounts of capital as the leading providers race to gain any advantage they can. And, Starlink has plans to take its current constellation of 10,000 satellites to as many as 42,000 down the road. Historically, companies demanding the highest levels of capital investment have not proven to be the strongest stocks. Beyond capital investment, there is no shortage of execution, funding, regulatory, and other risks for investors to worry about.

The bottom line is that no one knows for sure what a stock like SpaceX is worth. However, Aswath Damodaran, a professor at NYU’s Stern School of Business is perhaps better equipped than most to opine on this topic. Regarded as “The Dean of Valuation,” Damodaran is widely regarded as the foremost expert on valuation in the world. He wrote a detailed valuation of SpaceX on LinkedIn recently and believes its equity could be worth around $1.3 trillion, a far cry from the stock’s current market value.

Whether or not Damodaran is correct, or even in the ballpark, will unfold with time. However, the uncertainty around the business model, the volatility in the stock, and the speculative nature of investing in money-losing investments make this a high-octane bet (not investment) that should be approached with caution and a small (if any) position size within a portfolio.

There have been times historically when the market environment has rewarded stories like SpaceX. One of which was discussed in the first paragraph. However, there were other tech booms in the early 1900s with the advent of electricity and the Nifty Fifty era of the 1960s. Each, so far, has ended badly. The stock market declined 50% or more in each of these periods. Will it be different this time? Probably not.

The internet has fundamentally changed the way we live and work, but those stocks still got clobbered in early 2000. Many of them went out of business since they were unprofitable and had no further access to capital when the IPO market dried up. A local example is Global Crossing, which built out a network of undersea cables to facilitate massive growth in internet traffic. While the traffic materialized, pricing plunged and Global Crossing—which had acquired Frontier Corp. (formerly Rochester Telephone) in September 1999—declared bankruptcy in January 2002.

AI will likely bring further changes to our lives, but the laws (admittedly, they are more guidelines) of economics will eventually shine through the fog of bull market euphoria. When that happens, many of today’s brightest investment stars will fall to Earth, and it is likely that SpaceX will be among them.

Mark Armbruster is president of Armbruster Capital Management Inc., a registered investment adviser in Rochester, with more than $1 billion in assets under management. 

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