Key Points
Space Exploration Technologies (NASDAQ: SPCX) pulled off the largest IPO ever last month. The stock initially soared, but it has been moving south for a couple of weeks now. Shares of SpaceX have fallen to their IPO price of $135, as of writing. And there are good reasons it could decline much further, perhaps by as much as 30% (or more), by 2028. Here are three of them.
1. Enthusiasm will die down
Highly anticipated IPOs often trigger FOMO (Fear of Missing Out). Investors looking to get in early on hyped companies with seemingly highly attractive long-term opportunities bid up the share price as soon as they hit the market. However, enthusiasm eventually dies down, and the stock tends to fall much closer to levels that reflect its fundamentals. In SpaceX’s case, this may already be happening: Fading enthusiasm is likely one of the reasons the company’s share price has fallen back to its IPO level, 40% below the highs of about $225 it reached at some point. But we are still just about a month removed from the IPO. The stock could fall further as more investors begin evaluating the company on its fundamentals and not just its prospects.
2. The AI tailwind is years away
SpaceX has identified artificial intelligence (AI) as its largest opportunity by far. The company estimates a total addressable market of $28.5 trillion, of which $26.5 trillion is within its AI business. This is likely one of the key reasons why SpaceX sports a $1.8 trillion valuation despite not being consistently profitable. Every other publicly traded corporation on major U.S. market indexes that is worth that much generates consistent profits. Here’s the problem: SpaceX’s AI segment is not profitable right now, as the company is investing substantial sums to expand its reach in this market.
In 2025, SpaceX’s AI segment reported revenue of $3.2 billion and an operating loss of $6.4 billion. SpaceX will likely double down and continue pouring funds into its AI ambitions, meaning the segment won’t drive earnings growth anytime soon. In the meantime, the market has punished companies that spend heavily on AI without clear evidence that the investment is worth it. The same could happen to SpaceX.
3. Growing competition elsewhere
SpaceX is the leader in the space industry. It has pioneered reusable rockets and significantly reduced the cost of space travel. The company is still working hard to extend its lead in this field. But others are also looking to catch up. Japan and China recently successfully tested reusable rockets. They won’t compete with SpaceX for U.S. government contracts, but these successes show that SpaceX’s technological advantage isn’t absolute. The market may eventually factor that into the company’s valuation much more than it currently does, perhaps sending the stock much lower.
What is SpaceX’s intrinsic value?
SpaceX has a strong business, attractive prospects, and a competitive edge from technological expertise and vertical integration that has enabled it to achieve economies of scale. But at a market cap of $1.8 trillion, the stock looks way overvalued. Over the next year and a half (or so), it could fall to more reasonable levels. A 30% decline would leave the company with a market cap of about $1.26 trillion — a much fairer value for the stock, especially if it makes progress on various initiatives by then.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
