We Think the SpaceX IPO Is Overvalued

https://www.morningstar.com/stocks/why-we-think-spacex-ipo-is-overvalued?content_id=20768396545

by 0xedb • 1 month ago

268 293 1 month ago

m-hodges• 1 month ago

Even at $63 per share, we give SpaceX a lot of benefit of the doubt in two of the three scenarios, in which we assume the company can achieve a rapidly reusable Starship rocket enabling multiple launches per week and successfully commercialize data centers in space.
In our downside scenario, orbital data centers won’t work or offer any advantage over terrestrial ones. We surmise that the company, having invested tens of billions to find this out, would cut bait on the project sometime around 2028, the way management walked away from plans to build multiple small-car factories at Tesla.

kldavis42• 1 month ago

The orbital data center thing is really strange. Without some kind of massive technological breakthrough the physics of an orbital data center make no sense. Napkin math for a single data center including solar panels, radiators, compute and structure is somewhere on the order of ~6500 tonnes. Let's say Starship can put 100-150 tonnes into orbit per launch, that is somewhere between 40-65 launches for just one single orbital data center.

credit_guy4• 1 month ago

Let's say Starship can put 100-150 tonnes into orbit per launch, that is somewhere between 40-65 launches for just one single orbital data center.

Ok. And why does it follow from this that the physics of an orbital data center makes no sense?

hparadiz13• 1 month ago

The video they posted today outlines their specs. They are gonna be smaller. About 100T. Based on Starlink architecture but with way larger radiators and solar panels. Apparently the design is simpler than existing Starlinks because it has fewer different parts.

Specs: https://x.com/SawyerMerritt/status/2064108916611420273?s=20

jiggawatts2• 1 month ago

The actual “plan” is to just put a couple of GPUs in each Starlink satellite for inference.

They’re not launching something the size of a building!

datadrivenangel3• 1 month ago

They'll do smaller satellites, and if they can get an order of magnitude improvement on cooling and power generation to weight ratios, it'll be close to the same order of magnitude cost-wise as a terrestrial datacenter. 10x the cost is likely not enough to make it all work, so it's a bad idea, but it's possibly less bad than using lead ballast for starship launches... maybe.

overgard• 1 month ago

I'm pretty sure he's full of shit and has zero real intention of building orbital data centers. It makes for a good headline, which is what these AI companies are in the business of. The math doesn't math and the logistics of maintaining and building the datacenter seem insane.

JoshTko2• 1 month ago

It's a litmus test of who understand basic physics and thermodynamics

vagab0nd• 1 month ago

I think it comes down to scaling and removing the bottlenecks.

If you build one data center on earth, you did just that.

If you build one in space and make it work and cost effective, you can scale infinitely (which is why SpaceX is uniquely positioned), until you hit the next bottleneck (which is why Tesla is building a fab).

Tangential: If you play Factorio or Satisfactory, this is _all_ you do. Removing bottlenecks.

numpad0• 1 month ago

There are people arguing it has to be a signal processing backend for a realtime radar system based on Starlink Direct-to-Cell antennas.

IMO, that lines up with a weird remark from Musk around stealth jet obsolescence few years ago, and makes sense.

wmf2• 1 month ago

I see it as a hedge against NIMBYs. If terrestrial data centers literally can't be built then orbital is cheaper by definition. If not, just don't build them.

fc417fc8025• 1 month ago

I think that's looking at it the wrong way. Just view it as a fleet of satellites with computers in them that exist for the purpose of selling capacity. I don't see any issues with the physical fundamentals but the economics in terms of dollars either per flop or per bit transferred is where I don't understand how it's supposed to work.

Satellites are really expensive and electricity on the surface is relatively cheap. What hypothetical prospective customers are willing to pay the necessary rates? I understand that bandwidth back to the surface is expensive but are we really expecting so much raw data to be trapped in space that it justifies sending computers into orbit in order to crunch it at the source?

ink_133• 1 month ago

In our downside scenario, orbital data centers won’t work or offer any advantage over terrestrial ones

Technologically, will they work? Shovel enough money at the problem and there's no reason they shouldn't. Rack up some GPUs in a shipping container, attach a couple of solar panels to the outside, zip-tie a Starlink to the door. Except for the little problem of heat. Space isn't cold, it's more of a giant Thermos bottle, and they gotta park in full sunlight, which is famously the only thing supplying the heat that keeps the entire planet alive. Good luck to them with their radiator setup.

But economically? There's no chance. Too expensive to get into space, too many auxiliary systems required, no maintenance is possible, and, given the lead time of prepping payloads for launch versus the rate of new developments in AI hardware, likely badly behind the times if not outright obsolete on the day of liftoff.

There is no shortage of land despite what some in the media would have you believe. Those same solar panels work at ground level. DCs don't have to be water guzzlers or grid destabilizers. They'd be better off by every metric solving terrestrial problems for the same money.

Of course they won't work. It's ludicrous that we have to even entertain the thought of otherwise.

protocolture• 1 month ago

Do they have a projection for what the company will be valued when he gets to mars by 2017?

bayarearefugee• 1 month ago

We Think the SpaceX IPO Is Overvalued

Well... yeah, sure, everyone thinks that.

And the fact that it doesn't matter and won't impact demand for shares illustrates how increasingly and dangerously untethered the stock market is from reality.

nandomrumber• 1 month ago

The market can remain irrational longer than you can stay scared of it.

epistasis3• 1 month ago

Let's go check on the cautionary tales of the Tesla shorts.... poor folks, we let them run around in the yard of the asylum without a fence because they have lost the motivation even to run away. They just keep mumbling about PE ratios....

the_real_cher• 1 month ago

The federal reserve can keep printing money for longer than anyone can afford.

anon7000• 1 month ago

I mean the market is seemingly completely detached from the reality of financial performance. However, it’s VERY MUCH attached to the reality that is investor whims. You’re not betting on a company doing well, you’re betting that other investors won’t want to sell it en-masse. That’s it.

As far as I can tell, that’s exactly how it works. Reality is investor emotions. If it shouldn’t be that, I mean the whole system needs a rework.

bluGill• 1 month ago

Short-term, you are correct. However long-term, the stock market does tend to weigh value heavily. That is something that people who aren't familiar with the stock market often get confused because how can people who are in the short term and the wrong term have such different outcomes.

One of the obvious problems with the short-term thinking is you can trade on feelings all you want, but if things go really bad the company goes bankrupt and suddenly the court say no more trades allowed anymore and your and your value goes to zero.

ElProlactin3• 1 month ago

...and dangerously untethered the stock market is from reality.

"Disconnected from historical valuation norms" is a more sensible statement.

The idea that the stock market is "detached from reality" is dangerous too because the stock market is...reality. People make and lose real money in it every day.

There are good arguments that the historical valuation norms are reasonable and deviation from them is "dangerous" but there's no actual law that says the stock market needs to behave according to history.

While I personally think the current behavior has significant risk, I also can't dismiss that the role the stock market plays today is different. It's not just about raising capital, providing liquidity, price discovery, risk management and building wealth, for large numbers of laypeople it's also the go-to casino (entertainment) and a platform for expression (way to express dissatisfaction with corporations, politicians, the world, etc.).

valicord• 1 month ago

People make and lose real money in Las Vegas every day too, but millions of people don't have their retirement dependent on casino winnings.

ink_133• 1 month ago

For certain values of "reality". It doesn't take a financial analysis to tell you that it is bananas that Tesla (~1.3T) is worth more than four times as much as Toyota (280B), and yet.

Zigurd3• 1 month ago

There is a simpler explanation: passive investing in index funds turned out to be too effective and ruined the game for active investment management. Now the banks have figured out how to exploit passive investors and turn them into involuntary bag holders. That is why the IPO will go out at the stated price and the underwriters face little risk.

darth_avocado2• 1 month ago

And the fact that it doesn't matter and won't impact demand for shares illustrates how increasingly and dangerously untethered the stock market is from reality.

Part of the reason for this demand is the fact that index tracking funds like QQQ will be forced to buy up massive volumes of shares. Not only that but other non index tracking funds that track large cap stocks will also have to buy. Vanguard large cap for example manages trillions of dollars. That in itself will have 100s of billions worth of buy orders.

themafia4• 1 month ago

Does this not follow from the basic 401k structure in this country? Most people will be defaulted into a fund like Vanguard and from what I can gather from my co-workers, none of them are particularly wild about taking their retirement money and playing the day trading casino to try to increase their performance.

It's better than what preceded it but we still manage retirement wealth poorly.

johncearls• 1 month ago

On a tech site, pessimism like this make me sad. I'm a nerd. I have been dreaming of a future where humanity finally takes its place among the stars since I was young enough to have dreams.

I am looking forward to buying a little piece of it. I plan on putting a couple thousand into the IPO. I view it like buying into D.D. Harriman in "The man who sold the moon." I plan on taking those shares and forgetting about them for a couple decades. Maybe leave them to my grandchildren. This is the longest of plays and I hope it works out.

Maybe SpaceX will fail, but this is the first time since I was a boy that there is any real hope that humanity will step into that future, and I want to be part of it. Maybe Musk is suckering in dreamers like me, but I'll bet on a better future. This is it. This is our shot. Godspeed.

SeanAnderson• 1 month ago

Everyone says SpaceX IPO price is too high, but it's the most interesting IPO in a long time, it's critical to the US government, and America is, frankly, addicted to gambling. I'm not convinced it's going anywhere but up for a long while.

epistasis3• 1 month ago

Very little of the IPO is related to anything government, or space for that matter. It's mostly a rental service for some GPUs that were hoarded, with the promise that somehow in the future the $2B/month that Anthropic and Google are paying SpaceX for compute infrastructure will somehow grow, that somehow SpaceX will grab valuable GPU real estate before others and continue renting it to others who actually make productive services.

sumeno7• 1 month ago

Even SpaceX's own documents estimate the space stuff to only have an addressable market of $370B, and it's not like it's a document full of conservative estimates considering they estimate their AI at approximately the entire GDP of the United States.

p-e-w• 1 month ago

If SpaceX is indeed overvalued (which I have no opinion on), it above all else demonstrates how unimportant spaceflight still is.

SpaceX has been the only game in town for quite a while now, to such an extent that the intelligence agencies of foreign governments have no alternative but to launch with SpaceX. They now do more orbital launches than the entire rest of the world combined. If they really are worth less than Microsoft, then it seems space just doesn’t matter that much, because SpaceX is space for all practical purposes.

killingtime74• 1 month ago

I think you are conflating mattering and making money. You can matter a lot, generate a lot of social good and not make money.

This article is just about the making money part.

actuallyalys• 1 month ago

I think this is right. For example, GPS is tremendously useful, but you can use it for free. Similarly, while there are commercial weather services, a lot of people access the ad-supported versions[0] or get it from their government’s weather agency.

[0]: which obviously provide some revenue, but much less than the value provided.

mlyle• 1 month ago

SpaceX is important to launch and telecom, which are two big space verticals but not all of space.

Further, space is just reaching the point it can really grow.

Space is strategically important but perhaps not as directly economically valuable as Microsoft yet, and SpaceX is just a fraction of that value.

adgjlsfhk14• 1 month ago

Part of the problem with this argument is that for them to be worth a lot, you need both the amount of stuff launched into space to go up massively and for no one else to be able to build a rocket that's anywhere near as good. Spacex is doing really well now, but if Rocket labs, China, Blue Origin, or anyone else manages to make a rocket that's half as good, spacex needs to maintain a monopoly despite not having anything especially magic.

antonvs2• 1 month ago

Why would space matter, economically?

The real immediate economic value hasn't really changed for decades. Starlink is the most recent significant innovation in that area, and it's worth less than 3% of Google's revenue.

The hyped up reasons for space mattering are all completely speculative and at the limits, stretch the bounds of a sane person's credulity: asteroid mining - ok, there may be an economic case for that, but it's far future; colonies on the Moon and Mars - there's no economic case for those, it's purely a dubious expenditure of tax dollars that has no meaningful economic purpose. Etc.

So, what makes spaceflight "important" beyond what it's already used for and has been used for, for decades?

sumeno7• 1 month ago

SpaceX is not being valued based on the space part, it's being valued based on Musk's claim that the market for their AI is the entire GDP of the United States. The space stuff is only estimated as about 1% of their addressable market

mrcwinn• 1 month ago

However, we assign this scenario, in which both Starship is reusable and scaled orbital data centers are highly successful, a 7% chance of happening

I may agree with their overall sentiment, but I think this sort of formulation is just silly nonsense from analysts who build models instead of companies.

throwaway85825• 1 month ago

You need a probability in order to estimate expected value.

ncallaway2• 1 month ago

Okay, but if someone is going to invest money into companies they need some way of deciding what they think a company is likely to do in the future.

Are these kinds of reports mostly a lot of window-dressing around a gut-feel about what might happen in the future? Yea, of course. But, there's not really other options. Pretty much all the other options for predicting how much money a particular company is going to make in the future will also boil down to a gut-feel.

hparadiz13• 1 month ago

I want some shares purely as a novelty. Don't really care about the price. It's not about making money. It's about owning a piece of the future.

andyst• 1 month ago

well the good news is, you are exactly who they are looking for! you could just buy some merch though, which has the same effect

otherwise using ROIC or CAGR might be more optimal way to evaluate your investments

hparadiz13• 1 month ago

I already walked away with a 140k gain in TSLA. I did get some SpaceX t-shirts though. Most of my portfolio is decidedly boring right now.

laichzeit02• 1 month ago

Hey, I’m doing the exact same as OP and so is everyone at work I know who has a memefolio of shares. You never bet against papa Musk.

You guys are looking at these IPOs all wrong. Nobody is looking at valuations. It could open at $200 a share it would make no difference.

bdangubic• 1 month ago

If you want to own a piece of future buy some coal stock, it is what future looks like in America :)

oldfuture• 1 month ago

And the prospectus says it plainly: "Mr. Musk will be able to control the outcome of matters requiring shareholder approval."

Musk holds over 85% voting power through Class B super-voting shares (10 votes/share). Public investors combined will have 15%.

What Musk Controls:

- CEO removal = his consent. You can't fire him even if he destroys the company

- Take business for himself. SpaceX gets a rocket deal? Musk can say "I'll do it at Tesla instead"

- 85% voting forever. No expiration, no time limit, permanent control

- Board elections. You have no power to elect directors you trust

glaucon• 1 month ago

I haven't read the prospectus but I would be interested to know, when he dies, to what degree the "... control the outcome of matters requiring shareholder approval" part will be inherited. Does that facility just go along with the Class B super-voting shares? And if it does what does it mean if more than one person inherits his shares?

On the subject of the governance structure this [1] is worth a read ...

"The company significantly limits shareholders' rights to sue. SpaceX's bylaws will make it clear that anyone who owns shares "irrevocably and unconditionally" waives all rights to pursue a jury trial. Shareholders will also be prohibited from bringing class actions against the company, its directors, officers, controlling shareholders or bankers tied to the IPO, according to the filing.

Instead, shareholders will be subject to mandatory arbitration, which had long been illegal in the U.S. The Securities and Exchange Commission reversed its position, opens new tab in September, allowing companies to adopt mandatory arbitration policies, which are private proceedings overseen by arbitrators."

... I can't remember how much he spent in Pennsylvania but you might argue it was money well spent.

[1] https://www.reuters.com/sustainability/boards-policy-regulat...

nickff• 1 month ago

The voting issue is problematic, but the limits on shareholder class-actions seems like a good idea. Do you know of any shareholder class-action lawsuit that actually benefited the shareholders? They only ever seem to benefit the plaintiff lawyers pursuing the case.

tristanj• 1 month ago

Per the S-1, the class B 10x voting shares Elon owns are converted to class A upon transfer or sale.

redox992• 1 month ago

I think this is a very big issue. If SpaceX is very successful, will he pay out dividends, or will he spend everything on a mission to mars at a massive loss or something like that?

dozerly• 1 month ago

It’s very simple. You should expect he will do whatever benefits himself.

Laremere• 1 month ago

SpaceX has gotten reduced cost engineering since its inception, due to telling their employees that the entire purpose of SpaceX is to put humans on Mars. Everything was about making money while developing the technology to do, and then using that money to achieve that goal. Going public in this way fundamentally creates a conflict there. Given that Musk has already used SpaceX to bail out his Twitter acquisition, it feels like both investors and hopeful engineers are going to lose.

jaimex23• 1 month ago

Its going to Mars. You can't play the oblivious share holder victim with this stock and try and sue later saying you didnt know.

Thats always been the plan.

arjie• 1 month ago

If SpaceX is very successful he will spend everything on a mission to mars. He's pretty up front about this. If it costs a lot and the company runs at a loss then it costs a lot and the company runs at a loss. Read the S-1

We believe that our current space efforts will catalyze transformative breakthroughs that could reshape terrestrial industries and lead to the emergence of new trillion-dollar markets on the Moon, Mars, and beyond. In particular, we believe our goal of establishing a lunar presence will enable terawatt-scale annual AI compute growth, support deeper space exploration and industrialization, and serve as a stepping stone to establishing a civilization on Mars.

There is no secret about this. If this scares you, do not invest. Mars is mentioned 60 times in there. That's what he's going to spend the money on if it comes to it. If you don't want to lose your money on a Mars mission then the guys who are saying they're going to spend your money on a Mars mission are not the guys for you.

verandaguy3• 1 month ago

This should frankly be disqualifying for any company trying to go public. Super voting shares have their place but there's no scenario in which overall control of the company can be retained by super voting shareholders who make up a small minority of the overall shareholders.

The point of a company going public is not to just distribute possible profits among speculators, but to give the public a meaningful voice in company direction, in particular by offering escape hatches like being able to eject a CEO who's lost their mind and is no longer acting in the fiduciary best interest of the shareholders, which will so obviously happen here.

readthenotes1• 1 month ago

It should be described so buyers can beware, but it's a personal choice to decide whether someone trust Musk and his estate planning

WalterBright3• 1 month ago

The point of a company going public is not to just distribute possible profits among speculators, but to give the public a meaningful voice in company direction

The point is to raise money from investors. The investors get a voice in exchange.

laughing_man3• 1 month ago

This is not a new thing. Off the top of my head, I can think of similar arrangements at Meta, Alphabet, and the New York Times Company.

outside12342• 1 month ago

It is seriously baffling to me who is going to buy shares in this with 1) this structure and 2) at this valuation.

And it is a LOT of money that he is floating ($77B) so there have to be dumb people at scale for this to work.

sumeno7• 1 month ago

Look at Tesla stock and you have your answer. This will be another meme stock

laughing_man3• 1 month ago

The structure isn't all that unusual, but I agree on the valuation.

lenerdenator4• 1 month ago

If we were a saner society, this would not be a valid way to carry out corporate governance.

This is just sole proprietorship with window dressing.

joquarky3• 1 month ago

It's not that different from an NFT.

ralph84• 1 month ago

Voting control doesn't change management's fiduciary duty to all shareholders. The founders retaining voting control has worked out fine for Alphabet shareholders.

colechristensen• 1 month ago

It raises the bar to the courts for shareholder control.

The Google founders are, lets say, more reliable than Musk when it comes to making sound business decisions.

collinmcnulty• 1 month ago

Yeah but SpaceX says you need 3% of the company to sue, so that fiduciary duty is never going to be enforced.

overfeed• 1 month ago

The founders retaining voting control has worked out fine for Alphabet shareholders.

Only after the cofounders brought in veteran "adult supervision" who offered guided the company with a steady hand, while Larry and Sergei were safely in their moonshot hobby project play-pens, away from the core products - an arrangement that would greatly benefit shareholders in Musk companies.

Zigurd3• 1 month ago

Fiduciary duty is meaningless without recourse. The governance structure denies any recourse. A case of breach of fiduciary duty would never make it to trial under the governance structure.

jaimex23• 1 month ago

Tons of people are already buying you don't have to sell it to them.

I'll happily take Musks proven and superior leadership with guarantees over letting the company decline chasing short term sugar hits that destroy it long term.

jmyeet3• 1 month ago

This isn't even a theoretical concern and it goes well beyond unfettered control of a single company. Look at the history:

1. One of Elon's companies (Tesla) bought out another of Elon's companies (Solar City) that was going bankrupt because it owed a lot of money to yet another of Elon's companies (SpaceX) [1];

2. Elon diverted $500M of NVidia H100 GPUs reserved for Tesla to xAI [2];

3. Elon made a buyout agreement for Twitter then tried to back out. Twitter sued (for specific performance) and a Delaware judge agreed. Elon completed the purchase before the court ordered him to [3]. That purchase was secured by his Tesla shares. He ran Twitter into the ground and then created xAI in 2023 [4]. Both Tesla and SpaceX "invested" billions into it. Elon ultimately used the funds to buy out Twitter at an inflated price (and still less than he paid) [5]. He ultimately then bailed out the xAI investors by having SpaceX acquire xAI [6]. IMHO this made SpaceX a significantly worse company. It was also used to inflate the value of SpaceX by using some wildly optimistic made up numbers about the AI total addressable market; and

4. The Cybertruck has been an unmitigated financial disaster. It's a terrible car and sales are awful. But that's OK because Elon uses SpaceX to buy Cybertrucks [7].

At least with the Google founders and Mark Zuckerberg, they only had one company so they weren't playing corporate shell games or using it as a personal slush fund on this scale.

[1] https://www.nytimes.com/2026/04/24/technology/elon-musk-spac...

[2] https://www.cnbc.com/2024/06/04/elon-musk-told-nvidia-to-shi...

[3] https://www.npr.org/2022/10/06/1127346372/elon-musk-twitter-...

[4] https://research.contrary.com/company/xai

[5] https://www.reuters.com/markets/deals/musks-xai-buys-social-...

[6] https://www.bbc.com/news/articles/cq6vnrye06po

[7] https://www.businessinsider.com/spacex-bought-tesla-cybertru...

queenkjuul8• 1 month ago

I'd like to point out something i learned the other day:

Alphabet owns some SpaceX shares, which makes Google's sudden 90-day compute contract with xAI seem a little less than coincidental

porknbeans00• 1 month ago

spacex didn't buy x.ai or twitter because they were profitable. the old Elon bailing out Elon maneuver is alive and well.

partial225• 1 month ago

- Take business for himself. SpaceX gets a rocket deal? Musk can say "I'll do it at Tesla instead"

In theory (were we talking about any other man, in any other time) that's very strictly illegal with a whole area of law dedicated to it (fiduciary duty).

cameldrv• 1 month ago

It's really not a public company at all in the sense people are accustomed to. The super voting shares plus the 3% rule for a lawsuit plus the arbitration clause make Musk almost totally unaccountable. It certainly should not be included in stock indices that are used for passive investing, because it is a different category of asset.

cyberge993• 1 month ago

This category is affectionately known as a “meme stock”.

phs318u3• 1 month ago

Truly, in the face of this, caveat emptor has never been truer.

If/when Musk’s misadventures turn his companies to shit, I may spare a thought for the collaterally damaged, but not a single tear will I shed for the shareholders.

osigurdson• 1 month ago

I don't think many who plan on buying the stock it to be controlled by anyone other than Musk.

antonvs2• 1 month ago

Not a criticism of the article, but...

...from the pages of Duh Magazine

ancorevard• 1 month ago

You should beware of the predictive power of Morningstar before you read/take their advice.

jmyeet3• 1 month ago

From SpaceX's S-! it bases its valuation on the total addressable market of 3 markets, which is made up of:

1. Space operations: $370 billion;

2. Connectivitiy: $1.6 trillion, roughly split between mobile and broadband; and

3. AI: $26.5 trillion, which includes $22.4T in AI Enterprise applications, $2.4T in AI infrastructure, $760B in subscriptions (ie Grok) and $600B in digital advertising.

So immediately we see the limits of the space market. SpaceX did 170 launches in 2025. At $100M each, that's $17 billion in revenue and Falcon 9 launches just don't cost that much. That brings Starship into the picture but that program is arleady at $15 billion spent without a single dollar in revenue. So we know from the outset that only the other markets can really justify the STarship prgoram because you have to remember that STarship has to compete with Falcon 9. Or, even worse for SpaceX, a Falcon 9 competitor.

Now, as for Starlink, this one is interesting. Starlink has a big advantage when you need mobile broadband (eg planes, boats) as there's nothing really equivalent, Yes, there's 5G and that's fine in populated areas on, say, RVs and such. But the receivers are expensive.

I think Starlink is going to have a hard time competing with 5G, mainly because 5G already exists and Starlink handhelds are predicated on STarship being able to launch sufficient low-altitude V3 Starlink satellites, which themselves have a more limited life because they are lower altitude. And you're still going to have to deal with per-country licensing, marketing, regulations, etc.

I wonder how much of this is predicated on military applications.

But let's get to AI as that's the most hand-wavy (IMHO) of all this.

First, digital advertising. Well, when Elon bought Twitter it had $4.5B in ad revenuie. Now it's $1.8B. I also think Twitter is fundamentally limited so that's just not going anywhere. Twitter just isn't 10x'ing it's audience (IMHO).

Subscriptions? I think this is a dead market. For everyone. Why? There'll be a race to the bottom, hardware will get cheaper, eventually AI agents will be run locally (even on phones, eventually) and it's just not the cash show OpenAI, SpaceX or Anthropic think it is.

Let's also dispense with orbital AI data centers. It's a completely dumb idea. it's going nowhere. Don't believe anyone hyping it up. It makes zero sense and it will never amount to anything.

SpaceX seems unable to monetize their AI investments thus far. How do I know this? Because you don't lease DC space and GPUs to Google if you have a better use for them. So it not only looks like you're falling behind but you also need the cash. Also, this is dependent on getting enough GPUs. Published details about the Google deal seems to allow Google to cancel or revise the deal if SpaceX is unable to deliver so there is a huge risk here.

What none of these companies (SpaceX, Anthropic, OpenAI) seem to be addressing is what happens when future generations of hardware come out? What happens when running models locally becomes more and more viable? What if there is no expensive hardware moat? What happens when AI models get commoditized? I personally believe this last one will happen and China will make sure it happens.

So all in all there are a ton of risks here. I am skeptical about the long-term prospects of OpenAI in particular and Anthropic less so but I think xAI's (ie Grok's) future is way more uncertain.

I'm actually most confident in Google's future here because they haven't bet the company's future on AI not imploding.

SilverElfin2• 1 month ago

There'll be a race to the bottom, hardware will get cheaper, eventually AI agents will be run locally (even on phones, eventually) and it's just not the cash show OpenAI, SpaceX or Anthropic think it is.

That’s why we are seeing pushes for regulatory capture, safety fear mongering, large government contracts, and even potentially the government taking stakes in these companies. It’s a sprint to cash out before they get commoditized.

chvid• 1 month ago

My trading app (Nordnet - big in Scandinavia) is plastered with ads for the SpaceX IPO.

I don’t think I have ever seen this before.

rpmisms2• 1 month ago

I'm generally going to avoid betting against Elon.

jaimex23• 1 month ago

The downvotes are a good indicator you have the right idea.

rpmisms2• 1 month ago

Doesn't really matter. Elon just has a good track record of delivering value for investors, and will move mountains to make it happen.

dash2• 1 month ago

I wish Ed Zitron (currently also front page HN) would adopt this calm, measured writing style. It’s much more convincing and shorter to read too.

z3ugma• 1 month ago

Right?? His takes are so good but his brusque, smarter-than-you finger wagging is offputting

themafia4• 1 month ago

It’s much more convincing

Shouldn't your concern be whether it's true? Who asks to be "convinced?"

verandaguy3• 1 month ago

I need to understand what possible benefit there is to doing DCs in space. The cost would be, no pun intended, fucking astronomical. The cooling situation would make no sense at all -- the major up-and-coming application of DCs, LLM training, has absurd cooling requirements even here on earth where convective cooling is an option, to the point where many DCs use open-loop cooling. Latency might be better, in some cases, I guess, but probably not by some groundbreaking amount.

Who is this product for? How the hell did "data centres in space" make it into the prospectus at all?

More to the point, why is Morningstar being so generous with their interpretation of that line of business? It's plainly insane, and you don't need an advanced degree in physics to understand why.

NathanKP2• 1 month ago

It's easy to see the benefit in DC's in space if you look at a few ingredients:

1. The recent Iran drone attacks on AWS data centers

2. Growing anti-AI and anti data center sentiment at home, plus Larry Fink (ceo of Blackrock) in a recent interview being terrified of dissident groups using consumer drones to attack data centers.

3. Anthropic, Grok, and other AI vendors becoming more and more integrated into defense and military, plus increasingly reliance on AI for other national surveillance systems

Data centers are and will be targets, both for national military attacks as well as home grown dissident attacks, so they are proposing to move some of the critical workloads to somewhere that the only group that can attack the data center hosting the workload is a nation state with space launch capabilities. That significantly reduces the number of actors that can attack the data center. And if the US wants to they can probably bomb all the other space rocket launch facilities worldwide in less than 24 hours, leaving extremely limited capability to attack a space hosted DC.

Is it insane? Probably, but the US has done insane things with military budget before, and will continue to do so for a long time. If you are Elon, its a great time to milk that US defense budget for some more R&D, and even if the main project doesn't work out, he's still going to be able to keep some innovations within the company and apply them to Starlink and other more realistic endeavors.

themafia4• 1 month ago

1 -- Signal jamming exists.

2 -- Space also belongs to the citizens and not the corporations.

3 -- The defense industry is the single worst most corrupt and idiotic industry we still shackle ourselves to.

Grombobulous5• 1 month ago

Even with this benefit of the doubt, even stretching our suspense of disbelief as far as it can go, we are basically talking about a niche military application that inherently has a limited market value.

In other words, we can just assume this concept is possible and makes sense some level of financial sense for military, government, and high sensitivity use cases.

Well, find me a military contractor worth $1.5 trillion. Lockheed Martin is worth 1/10th of that.

Put Lockheed Martin and AT&T together and you’ve got about 1/5 of a SpaceX IPO target valuation.

Even if we make this assumption that the technology is marketable and has merit, it’s not like every company or government agency is going to want to switch to this technology. There are already a number of alternatives that can mitigate many to all of the risks that it solves.

The cost and complexity right now to deploy global services and their disaster recovery replicas to multiple distant data centers in the terrestrial world is already extremely low. Often, these features are offered as an off-the-shelf service.

California could sink into the ocean and my users wouldn’t even see a blip of downtime. Unless they live in California.

Heck, build some data centers underground in deep fortified bunkers if you want. That would be cheaper than launching them into space. They might even be easier to defend than satellites and space DCs because a foreign adversary can’t just launch a missile up in the sky to get to it.

Going back to not really suspending disbelief as much, I also think performance and latency is going to be an insurmountable problem. Right now as we speak Starlink residential service is about 10x slower than my home fiber connection at the same price. How is this technology going to compete with data center level infrastructure even in an optimistic scenario?

I can toss pennies per hour at Amazon for a relatively small VM with like 4GB of RAM and they’ll give that thing a 15 gigabit connection.

Delphiza• 1 month ago

If the only benefit of space-based datacentres is a hedge against infrastructure attacks in a world war then we are in an awful place.

I'm not disagreeing with you but peace is far more prosperous for humanity than blowing the worlds' retirement funds on datacentres-in-space as a military endeavour.

Grombobulous5• 1 month ago

I would like to add to my reply to this comment, that heat management in space is extremely difficult.

The idea that we can manage heat in a data center scale in low earth orbit is pretty much impossible.

Look into the physics of the problem and how heat transfer works in the vacuum of space.

archagon• 1 month ago

It’s trivial to attack things in space if you also have stuff in space. Just ram your cheap satellites into the other guy’s. Do it right and the destruction will cascade.

piloto_ciego2• 1 month ago

It's so you don't have to ask anybody for permission. That's it.

Right now, 70% of the country is at least skeptical of DCs and at worst absolutely hate them. NIMBY is basically the rallying cry. That's why you go "up" (if they can make starship work). The physics is "hard" but doable, you can keep them cool enough in a sun synchronous orbit. The math pencils out. It's not my field, but back of the envelope math seems to work. Scott Manley has a video on it if you're skeptical.

But, people keep thinking about this like "return on investment" is the only thing driving this play. They're literally the only company with a mostly reusable system (unless you count that company trying in China?). They're the closest company to a fully reusable launch vehicle. They have a ton of government contracts with star shield. After Bezos' rocket blew up last week, there's basically nobody close to competing with starlink...

I am not a Musk fanboy, but, like, there is literally no other serious space competitor right now. I mean, "maybe" Boeing? But not really - they're years away...

So, like if you read about the Memphis Datacenter - Colossus I think? They're unable to get power, they're pulling in power from Mississippi to keep the thing running. You know how many times they have to ask permission for that? The infrastructure costs there just to power it start to get absurd too. Then the unending line of approvals and environmental impact studies and permits. For all the people saying, "it'd be cheaper on earth" it might be in terms of dollars, but if you can basically iterate entirely unfettered in space, it's the obvious choice if you can make it happen.

Like, seriously, go try to build something, there are a LOT of rules outside of rural areas. It's literally why my wife and I decided to build our cabin where we are building, because there were basically no restrictions. Meanwhile in town, my buddy's deck was a nightmare to permit... it was a deck, not bridge. Seriously, to all the people saying, "it's easier" go try to get something built in a big city or where you have to fight through permit hell.

These tech oligarch guys view this (I think rightly - it's one of the only things I view them as right on) as a race to AGI against the Chinese. We're in the lead right now, cool, but the Chinese have excess kilowatts and we don't. In fact, we don't have adequate power plant infrastructure at all and we couldn't get the power plants built if we wanted to (the Ezra Klein and Derek Thompson book Abundance touches on this topic if you're curious as to why). It's not going to happen.

But up? No NIMBYs in space (yet). So they're going to go where nobody will tell them "no." At least, that's what I would do if I owned a literal rocket company.

People are all looking at this stuff through the lens of "money" as if that matters hardly at all after AGI, lol. The analysts are looking at this like it's 1995. I mean, PE ratios are important, don't get me wrong, but after 2016, and Trump, and the applications of transformers, and the war in Ukraine (and current shit show in Iran), and the rising price of fuel, and, well I'll stop, the list goes on and on, but acting like the "normal" rules of investment apply is just silly. This stuff is about power, and he who controls access to orbit is worth a basically unlimited amount of money...

Do I wish it was happening differently? Yup. But hey, we decided to give up on space as a country like 50 years ago, maybe we can try to do cool stuff in space now.

enraged_camel• 1 month ago

> It's so you don't have to ask anybody for permission. That's it.

This doesn't make sense because there's one party whose permission you always must ask, and that's the government. They are the ones who get to decide whether you can launch your rockets.

A more accurate version of your claim would be: datacenters in space allow you to deal with one party (i.e. the government) instead of many. So long as your relationship with that one party is good, your business plan is safe.

preg_match• 1 month ago

It's so you don't have to ask anybody for permission. That's it.

I would think this is a very temporary victory. You only don't have to ask permission right now because nobody is doing it. But space does actually belong to people, as in there are a lot of different stakeholders with their own motivations. And, that also naturally includes every country's military. I don't foresee everyone just rolling over and accepting massive amounts of space junk without at least getting their piece of the pie.

I also don't think we gave up on space as a country. We have Artemis. I think we sort of realized that there isn't much in space. Outside of science-y stuff and research, there's really nothing to do. There's no products to be made, and our country revolves around consumerism. I think space DC's will be the same story. Does it make sense from a money perspective? Because I think that's really the only perspective that matters.

sumeno7• 1 month ago

There is no benefit, and they aren't going to actually do it in any meaningful way. When was the last time Elon Musk made a factual forward looking statement about one of his companies or products? It's all just bullshit, no need to dig deeper than that.

Terr_2• 1 month ago

Who is this product for?

1. Using one part of Musk's holdings to trick people into feeling optimistic about how it will do incest with another part.

2. Megalomania dreams of becoming the Tessier-Ashpools from Neuromancer with their private fiefdom.

tim3332• 1 month ago

The main argument is if you scale up a lot you run out of electricity supply on Earth.

Joel_Mckay• 1 month ago

Maybe, but his proposed share structure is hilarious. I can't tell if Musk is serious or trolling Wall Street again. =3

6stringmerc• 1 month ago

This is the most white collar “we call bullshit” type of writing I’ve seen in a long time and I’m here for it. Not a good sign for the next two AI IPOs either. SpaceX had the hubris to release their S-1 publicly and whatnot. This is going to be “Hot Garbage Summer” in the equities market lmao. GG VCs.

JoshTko2• 1 month ago

And water is wet

GMoromisato2• 1 month ago

A lot (everything?) hinges on orbital data centers. If they don't work, SpaceX is overvalued.

SpaceX plans to launch 120 kW satellites, each weighing 1.7 tons. Let's be conservative and say it ends up being a 100 kW satellite massing 2 tons. Let's be conservative and say Starship can launch 50 tons to orbit for $20 million ($5 million more than a Falcon 9 launch).

50 kW per ton x $400K per ton = $8,000 per kW = $8 million per megawatt in launch costs.

That means a 100 megawatt orbital data center will cost $800 million to launch.

You need about 833 satellites for 100 megawatts, so let's round up to 1,000 satellites. Let's say one of these satellites cost $3 million (that's probably high, but let's go with that for now). That's about $3 billion for satellite manufacturing.

Bottom line: It will cost SpaceX $4 billion to launch a 100 megawatt data center.

Anthropic is paying SpaceX roughly $50 million per megawatt per year. SpaceX could sell access to its data center for $5 billion per year. Assuming the satellites last for 4 years, that's $20 billion in revenue from $4 billion in costs.

Please correct my math/assumptions, but this rough calculation shows that SpaceX could be right and Morningstar could be wrong.

ncallaway2• 1 month ago

Morningstar does think it's a possibility that Starship ends up being highly successful as a reusable platform and that orbital data centers end up being very successful, they just assign a 7% chance for that outcome.

GMoromisato2• 1 month ago

Fair point. Even if the math works, SpaceX could fail at execution for any number of reasons.

crowcroft• 1 month ago

I guess to this point the argument for the valuation is just, do you think Elon will beat the (very bad) odds?

I wouldn't take that bet, but I can see why some people would.

naet• 1 month ago

I think starlink made intuitive sense; we already use satellites to transfer data for phone service and TV channels, a satellite can "see" a large area to service, the technology was there already, etc. Starlink provides a service you can't really get without going to space (coverage in remote areas).

The space data center doesn't make intuitive sense to me. Why put it in space? Wouldn't it be better just... on the ground? The technology doesn't feel like it's there either, and there would be significant competition from existing or new data centers that don't have all the drawbacks of orbiting the planet.

ericd11• 1 month ago

The US power grid is not able to keep up with demand, it's mired in red tape. There's also a populist revolt against DCs and the infra upgrade costs being dumped on ratepayers. That's the main benefit I see of their plan, from a US perspective. I think China probably will have a significantly easier time.

pu_pe• 1 month ago

Please correct my math/assumptions

1) You forgot to include the actual costs of the GPUs and other equipment, you are just calculating launch costs which will always come on top of the other stuff

2) Datacenters require repairs and hands-on attention, and space provides extra challenges like radiation to deal with

3) They have not provided any evidence that they can solve the heat diffusion issue, which could kill the whole project

4) Musk's track record for outlandish tech is poor (hyperloop, fully autonomous driving, Mars trips, etc. were significantly delayed or not achieved yet), and unlike some of these other things no one else seems to think this is economically feasible

mattas• 1 month ago

Data centers at the bottom of the ocean make more sense than data centers in space.

Hansenq• 1 month ago

You can absolutely level this claim against Tesla too. When deliveries dropped a year ago, the stock price didn't go down. Tesla's stock is disconnected from the fundamentals and every stock investor today knows this.

Why would SpaceX be any different? If anything it would be even more disconnected from the fundamentals than Tesla is, given how much more control it gives Elon.

SpaceX stock is a bet on Elon, full stop. It has nothing to do with space, data centers, AI, or whatever technology they're currently working on; it's a bet that Elon will figure something out.

(and if you need any example of this, just look at Twitter--he engineered an exit for his X shareholders at a higher valuation [at the expense of SpaceX, but a positive exit nonetheless])

tyre4• 1 month ago

Yeah you can’t go into this with any expectations or later complaints. Everyone knows at this point that he’s going to do whatever the fuck he wants. If you give him money, that’s what it’s for.

I say this entirely neutrally. Some people want to invest in that—and he’s made a boatload of money for those who have thus far!—while others find it insane.

But you don’t get to buy into this and complain.

kurthr• 1 month ago

If you have ETFs or index tracking funds in your 401k you're going to buy it. In fact, you'll buy more of it than is going on sale. Since they only need to issue 5% of the stock for it to show up as a 20% market cap in the QQQ index and tracking funds own over 20% of the market, they pretty much have to buy all the shares. Welcome to market manipulation 101.

andai• 1 month ago

He seems pretty good at figuring stuff out.

jeremyjh2• 1 month ago

Like how he figured out how to destroy half the enterprise value of Twitter?

Like how he figured out how to promise full self driving cars in about six months? For eight years running?

Like how he figured out how to cut USAID programs that prevented and treated malaria and tuberculosis with no plan or warning?

There is never going to be a long-term colony on Mars. It is the most childish conceit imaginable.

m463• 1 month ago

You are downvoted, but I think you are right.

He is not popular. I am sort of reminded of folks from hollywood or tech who collide with politics... and not everybody becomes ronald reagan.

Also, someone doesn't get to be the richest man without controversy.

But controversial or not, I think he has been a net positive.

Would we so profoundly have electric cars if tesla hadn't shaken the status quo? Sure, now ford has cancelled the lightning, but they now have people who know about EV technology deep within their stodgy ICE stronghold.

Right now there are 14,000+ satellites in earth orbit, 11,000+ are from the US, and 10,000+ of them are from spacex.

By any objective measure, he has figured stuff out. And he has shaken things up.

jmyeet3• 1 month ago

I 100% agree SpaceX (and Tesla) is a bet on Elon, completely divorced from the fundamentals. But I don't think people realize just how risky this is.

Tesla is only one administration change away from going bankrupt. Ask yourself what would happen to Tesla if BYD could freely import cars.

This might not even take an administration change. Elon very famously had a public falling out with Donald Trump, going so far as to call the sitting president of the United States a pedophile, basically [1]. Now, as a Tesla investor, what to make of this? Elon is technically risking the entire company on a childish outburst.

SpaceX at least has some competitive advantages. Falcon 9 as a launch system is unmatched. Nobody can currently compete with the track record and cost per launch (factoring in booster reuse). That may change but the next company has to compete with the Falcon 9 and develop a proven track record. Also, SpaceX is American so it has guaranteed business from the US government for national security reasons.

But, space operations are a rounding error in the valuation model for SpaceX. All of the AI stuff is bullshit, basically, particularly space-based data centers. STarlink is interesting but is dependent on Starship and will have to compete with 5G operators.

[1] https://thehill.com/homenews/administration/5387380-elon-mus...

shushpanchik• 1 month ago

Tesla is only one administration change away from going bankrupt. Ask yourself what would happen to Tesla if BYD could freely import cars.

Well, here in Australia, BYD (and lots of other CN EV brands) can freeely import cars, and Model Y still outsells every other EV. [1]

[1] https://thedriven.io/2026/06/03/australian-electric-vehicle-...

a34729t• 1 month ago

IMO the purpose of going public is primarily to make it hard to nationalize SpaceX, which some people have called for.

SilverElfin2• 1 month ago

Also see Aswath Damodaran’s updated analysis. It’s not quite as dire as Morningstar but is still lower than what musk wants.

At the rumored pricing of $1.8 trillion for the company, it is too richly priced for my tastes, given my valuation of $1.25-$1.35 trillion for the equity in the company.

https://aswathdamodaran.blogspot.com/2026/06/a-weeks-ago-i-a...

swader999• 1 month ago

I don't think euv capacity will ever make data centers in space a thing.

signatoremo• 1 month ago

No matter what a stock broker thinks, the market decides. At this moment SpaceX’s shares are oversubscribed:

https://www.bloomberg.com/news/articles/2026-06-08/spacex-ip...

tim3332• 1 month ago

Also trading on crypto futures markets at ~$160 vs the $135 IPO price so you should probably buy and flip to a greater fool.

exabrial• 1 month ago

No duh.

This isn't different than any other tech IPO in the last 15 years.

taffydavid2• 1 month ago

Why are we considering data centers in space? What problem does it solve? I don't understand this concept at all.

Surely putting server racks in orbit where you can't do basic maintenance without sending someone up there is a terrible idea?

It just always puts me in mind of the story of an IT guy having to travel for two days to go to a premises and turn on a server that three separate people ensure him was already on.

martheen• 1 month ago

The only people considering data centers in space are those too out of touch to remember that their vacuum flask retain heat for hours. At any usable capacity we'd be talking about massive field of dissipators, which can't be possibly profitable considering there are far more lucrative payload compared to dumb panels. Some would pretend there's a just around the corner tech to solve the heat waste, but if such tech really exists one of the criticisms of terrestrial data center (wasting stupid amount of water) would've been solved anyway making space data centers even less viable.

And there's also bitflips. Acceptable for astronauts carrying normal laptop to watch movies, but in a data center? Solving it through redundancy easily cut the usable capacity to half, and there's not enough shielding with any competition for the payload slot.

The usual criticism of Mars colonization is maintaining a base in Antarctic is already a heroic effort despite being relatively easier. Google and Microsoft mostly abandoned their "data center underwater in nearby shore" plans even though in those the tech would've only sat for few minutes going down or alternatively waiting for the problematic module being floated to the surface.

taffydavid2• 1 month ago

Great, so I'm not just some idiot who doesn't get it. Why then is anyone entertaining this IPO when it's clearly based on such a dumb plan?

dlcarrier• 1 month ago

The real question is whether or not the stock will be more overvalued, immediately after the IPO. My brother earned a bunch on the Rivian IPO, despite considering it overvalued, because he figured it likely wasn't overvalued enough.

marysol5• 1 month ago

For a moment then I thought this was the communist newspaper Morning Star https://morningstaronline.co.uk/

No wonder they think it's "over valued"

slowmovintarget• 1 month ago

80% of all mass launched from Earth in 2025 was launched by SpaceX, and 95% of those launches were with reusable systems.

That dwarfs all other launch capabilities on Earth, including all governments. Short and medium term value may be shaky if you evaluate SpaceX as a typical business.

Compute in orbit is "stupid" only to those who don't think it through. Their biggest initial customer for that feature will be Google, and through Google, Apple; two of the highest value tech companies on Earth. Seems like a fascinating flywheel to me.

We Think the SpaceX IPO Is Overvalued

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