Key insights
- SpaceX's potential IPO is generating significant buzz with a $1.77 trillion valuation target. While the company's dominance in space launch, Starlink, and xAI division present long-term growth potential, analysts like Morningstar suggest the current valuation may be overly optimistic, recommending a more cautious approach and potential entry at lower levels post-IPO. This could signal a high-profile, potentially overvalued tech offering impacting investor sentiment.
The SpaceX (SPCX +19.17%) initial public offering (IPO) could break records this week. The company is reportedly targeting a $1.77 trillion valuation, raising as much as $75 billion in capital.
Many investors are wondering if they should participate in this IPO. While there are several ways to buy into SpaceX before the IPO, most investors are better off waiting for shares to become publicly available. Before you invest, it's important to assess whether or not you actually believe SpaceX's $1.77 trillion valuation target is reasonable.
There are many reasons to believe SpaceX could far exceed this valuation in the long term. The company has a major lead in getting payloads to space safely, consistently, and cheaply. It also boasts a profitable Starlink division that provides internet and mobile connectivity services worldwide. And, of course, SpaceX's xAI division is planning one of the largest data center buildouts in history.
To be fair, a growing number of experts are concerned that the valuation may be overly rich -- at least over the near term.
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"The company has redefined the economics of spaceflight, built a dominant position in global launch, and extended connectivity to places beyond the reach of traditional infrastructure," a recent Morningstar report admits. "The valuation, however, deserves more careful scrutiny."
Morningstar analysts conclude that SpaceX's appropriate initial valuation should be somewhere closer to $780 billion -- less than half of SpaceX's internal target. "We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO," Nicolas Owens, a Morningstar analyst, warned last week.
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But let's forget about the short term for now. Five years from now, how big could SpaceX actually get? There are several ways to gauge an approximate answer. One growth catalyst in particular should dominate any discussion about SpaceX's future: AI.
SpaceX CEO Elon Musk is going all in on AI. His other trillion-dollar business, Tesla, has dedicated much of its $20 billion spending plan for this year to AI. The same is true of SpaceX's spending plan.
Last year, SpaceX's capital spending was around $20.7 billion. That's four times higher than the spending total just two years prior. While Starship development accounted for much of the surge, AI spending growth was the biggest contributor.
Growth in AI spending has not abated. In the first quarter of 2026 alone, capital expenditures for SpaceX totaled $10.1 billion -- $7.7 billion of which was related exclusively to AI.
This pace of growth is expected to continue. In 2030, Evercore ISI sees SpaceX's capital spending reaching an astounding $360 billion. That figure is projected to nearly double to $732 billion in 2031, with AI spending accounting for $666 billion of that sum.
This type of spending is understandable given the details revealed in SpaceX's IPO prospectus. "We believe we have identified the largest actionable total addressable market in human history," the document claims. "We estimate that our quantifiable TAM is $28.5 trillion." Of that total addressable market, the AI opportunity alone is estimated at around $26.5 trillion. The potential value of every other opportunity -- everything from rockets to Starlink -- SpaceX values at just $2 trillion.
How big will SpaceX be five years from now? If the company is spending $732 billion on capital expenditures alone in 2031, its market cap should be significantly higher than that. This year, for comparison, Alphabet is planning $185 billion in capital expenditures. Its market cap is therefore around 24 times its annual capital expenditures. Applying the same multiple to SpaceX's expected 2031 spending results in a potential market cap of more than $17 trillion!
Of course, the multiple at that point in time could change dramatically. And there's serious doubt whether SpaceX will ever have the capital to achieve such significant spending. But post-IPO, expect a major spending spree, one that will attempt to make the company the largest AI business globally by 2031. Time will tell whether that feat is achieved.