The recent SpaceX IPO on June 12, 2026, saw shares debut at $135, closing with a market capitalization exceeding many countries' stock markets combined. The hosts express significant skepticism about this valuation, particularly in light of SpaceX's prospectus claiming a Total Addressable Market (TAM) of $28.5 trillion, which they find heavily inflated. They believe a "very well-crafted narrative" is driving investor interest, but emphasize that in the long term, the market is a "weighing machine."
Elon Musk's influence is acknowledged as a major factor in SpaceX's popularity, with past successes like Tesla leading many to follow his ventures. The hosts, despite their analytical approach, admit to the "fascinating" nature of SpaceX's business, tapping into the "eight-year-old kid inside me who loved rockets." They also connect the current market euphoria to John Kenneth Galbraith's theories on speculative bubbles, noting the "specious association between money and intelligence" as wealthy investors participate.
SpaceX's business is divided into three segments:
1. **Space Segment:** Responsible for rocket development, launch services, and development contracts. SpaceX is praised for pioneering reusable rockets, drastically reducing costs (e.g., Falcon 9 at $74 million per launch vs. NASA's $2.5 billion average). They handle design, manufacturing, launch, and refurbishment, achieving a 99% success rate over 650 launches. Future rockets like Starship promise even greater cost reductions, aiming for $100 per kilogram to orbit, down from $2,000 for Falcon 9.
2. **AI Segment (XAI/X):** Formed from Elon Musk's acquisition of Twitter (rebranded X) and a later merger with XAI, featuring the Grok chatbot. The hosts are highly skeptical of this segment, deeming its moat "the weakest." They highlight XAI's massive losses ($6.3 billion operating loss on $3.2 billion revenue in 2025) and significant CapEx ($12.7 billion), questioning its competitive standing against rivals like OpenAI and Anthropic, and the long-term value of X (formerly Twitter).
3. **Connectivity Segment (Starlink):** Described as SpaceX's "crown jewel" due to its high operating margins (40%) and adjusted EBITDA margins (63%). Starlink operates 9,600 satellites, serving 10.3 million subscribers across 164 countries. It includes consumer broadband, enterprise solutions, government contracts (StarShield), and satellite-to-mobile services. While ARPU is declining (from $88 to $66), this is seen as a strategic move to gain market share, with future V3 satellites promising 20x the throughput capacity of V2, further improving efficiency.
The hosts argue that while the Space and Connectivity segments possess strong, widening moats (low-cost provider, vertical integration, first-mover advantage), the AI segment acts as a "capital incinerator," largely subsidized by the profitable connectivity business. They draw a parallel to Alibaba, where one strong segment carried others.
Financially, the IPO raised a record $85.7 billion, boosting SpaceX's cash reserves to over $101 billion and resulting in negative net debt. However, the company is in heavy reinvestment mode, with $19.7 billion in CapEx in 2025 and $8.6 billion in R&D, much of which is expensed. Executive compensation is unique: Elon Musk receives a token salary, but his long-term incentives are tied to both market capitalization milestones (up to $7.5 trillion) and the establishment of a "permanent human colony on Mars with a million inhabitants."
Key risks identified include the current "insanely forward-looking" valuation (110x revenue, 500x adjusted EBITDA), "key man risk" associated with Elon Musk, regulatory challenges (FAA, government contracts, AI), and the concept of "reflexivity" where Musk's narrative can influence stock price. The most significant point of contention is SpaceX's claimed $28.5 trillion TAM. The hosts' analysis drastically reduces this: $50-100 billion for Space (vs. $370 billion), $300 billion for Connectivity (vs. $1.6 trillion), and $200 billion for AI (vs. $26.5 trillion), leading to a more realistic ~$600 billion combined TAM.
Based on their valuation model, even with aggressive revenue growth assumptions (37% CAGR to 2031) and improved EBITDA margins (26%), the current stock price implies a downside of nearly 10% compounded annually. Applying a 40% margin of safety pushes the projected return to negative 18% annually. The hosts conclude that the stock is "too rich for our tastes" and that, despite Musk's undeniable achievements, SpaceX at its current valuation does not present an attractive investment opportunity.