For two decades, SpaceX earned its reputation the hard way. Three catastrophic early failures. A near‑bankruptcy that Elon Musk himself described as existential. A slow, methodical rise. And finally, a near‑monopoly on orbital launches. The company brought the price of space launches down by 85%, and it made reusable rockets a reality. Critics said it was impossible. SpaceX did it anyway. Then something changed.
On June 12, 2026, SpaceX went public in the largest IPO in financial history, blasting past a $2.3 trillion valuation in its first hours. It instantly became the seventh most valuable company on Earth, worth approximately the same as the entire country of Canada. For some, that was a sign of strength. For others, it was terrifying, because the company that went public is not the company most people think they invested in.
85% of the Business Has Nothing to Do With Space
Every company that files to go public must submit an S‑1 prospectus. That document includes an industry classification code. For aerospace companies like Boeing or Virgin Galactic, the code is 3760 (spacecraft) or 3182 (defense and aeronautical). Those codes tell investors exactly what business they are buying.
SpaceX filed under code 7370. That is computer programming and data processing. According to its own prospectus, SpaceX is officially an AI data center company.
The S‑1 filing also includes a TAM – total addressable market. It is the maximum revenue opportunity available if a company achieves 100% market share. SpaceX’s prospectus lists its TAM as $28.5 trillion. That is roughly the size of the entire US economy. Here is the detail the headlines missed. Only 15% of that market is space and communications. It is written in plain text on page 11 of the prospectus. The remaining 85% is AI.
In other words, SpaceX is telling investors that its future, and the vast majority of its valuation, depends entirely on artificial intelligence, not on rockets, not on Starlink, and not on Mars colonies.
The xAI Merger That Broke the Company
In February 2026, SpaceX merged with xAI, Elon Musk’s artificial intelligence company. Before that merger, SpaceX was profitable. In fiscal year 2024, the company cleared approximately $791 million in net income. Its capital expenditure was a manageable 42% of revenue. After the merger, everything changed.
Retrospective accounting attributed a net loss of $5 billion to SpaceX for 2025. xAI was bleeding money at an astonishing rate. In 2025, the AI company lost $2 for every dollar it earned, burning through approximately $28 million per day. Quarterly losses accelerated through the year. By the first quarter of 2026, xAI’s capital expenditure alone reached $7.7 billion, an annualised pace of $30.8 billion, more than double the entire prior year.
SpaceX’s capital expenditure, which had been a manageable 42% of revenue, ballooned to 215% of revenue. Every dollar that xAI burns is a dollar that the rest of the company could have used for research, development, or expansion. Objectively, SpaceX was a great company on its own. There was no need to shove AI into it.
The Management Exodus That Raises Red Flags
Musk founded xAI with 11 co‑founders in 2023. Today, all 11 have left. That level of attrition is not normal. It suggests deep internal problems that the prospectus does not fully disclose. When the people who built the company from the ground up walk away, investors should ask why.
The Strange Smell of Circular Financing
xAI’s revenue model also raises questions. Google entered a partnership to lease GPU compute from xAI for $920 million per month. That sounds impressive. But the contract allows either party to terminate with 90 days’ notice – hardly a stable, long‑term revenue stream. More concerning is the ownership structure. Google holds a 6% stake in xAI. The deal is not an arm’s‑length transaction. It smells of circular financing and revenue‑boosting designed to prop up the SpaceX IPO prospectus.
Then there is the Anthropic deal. In May 2026, Anthropic signed an agreement to use SpaceX’s data centre capacity. But that deal only exists because xAI reportedly screwed up the design of its first mega data centre, building it with three different types of GPUs. The fastest GPUs sat idle waiting for the slower ones to finish. AI training ran at only 11% of full capacity.
Unable to use the facility for its own purposes, xAI decided to rent it out instead. That is not a sign of management competence. It is a sign of desperation.
The Space Data Centre Gamble
SpaceX has filed with the FCC to build a space cloud of up to 1 million satellites. Orbital AI compute is targeted to begin by 2028. The current Starlink network has 9,000 satellites. Building 100 times that number is an entirely different engineering challenge.
Coordinating 1 million autonomous objects in low Earth orbit is already a nightmare. But there are deeper technical problems. In space, there is no air and no water. Heat radiation becomes highly inefficient. GPUs generate enormous amounts of heat. Dissipating that heat without convection is a serious engineering hurdle.
Cosmic rays and solar protons cause bit flipping in memory, leading to calculation errors. That is not great for some of the most densely packed transistor technology in existence. Energetic solar particles can destroy unshielded GPUs. The Van Allen belts degrade solar panels over time. Solar flares can cause massive radiation sparks, potentially destroying entire swaths of hardware.
To fix these problems, each satellite requires heavy radiation shielding and redundant systems. That adds mass and cost. Lots of cost. Even if the engineering works, the economics are questionable. GPU technology becomes obsolete every three years. Launching millions of dollars of hardware into orbit that will be outdated before it becomes operational is a hard sell. If LLM algorithms become vastly more efficient or AI shifts to running locally on devices, the entire thesis of a space‑based data centre collapses.
The NASDAQ Said Yes. The S&P 500 Said No.
SpaceX had hoped to fast‑track its way into the S&P 500 immediately upon listing. That would have forced every 401(k) and pension fund in America, and many more around the world, to buy the stock. Approximately $14 billion in passive fund inflows would have flowed straight into SpaceX. It would have been a massive wealth transfer from ordinary working people to early investors.
The S&P index committee said no. To join the index, a company must be profitable in its most recent four quarters. SpaceX did not meet that mark. Despite posting $18 billion in revenue in 2025, the company lost $5 billion for the same year.
The NASDAQ, however, said yes. Some passive funding will still flow in. And because SpaceX will be fast‑tracked onto the NASDAQ index, major funds will be forced to buy shares. Australian investors, European investors, and countless others will be exposed to SpaceX whether they want to be or not.
S&P Global said it was not changing the requirements for entry into its major indices, dealing a setback to Elon Musk's SpaceX by effectively ruling out a swift entry for the world's biggest-ever IPO into the benchmark S&P 500 index https://t.co/opErzva3jI pic.twitter.com/zsk4rlBwCR
— Reuters (@Reuters) June 5, 2026
A Trojan Horse Called xAI
Here is the uncomfortable truth that the prospectus buries under 11 pages of rocket talk and Mars colonies. SpaceX is not going public on the strength of its aerospace business. It is using that business as a Trojan horse to float an AI company that is losing nearly a billion dollars a month.
In a rational market, investors would see through this. But the AI bubble has distorted everything. Every company with a chatbot or a data centre gets a valuation that defies gravity. And now, a genuine, world‑class aerospace company with a profitable satellite internet business and no competition has been hijacked by the same hype.
Starlink generated $11.4 billion in revenue and $4.4 billion in operating profit in 2025. SpaceX had zero competition in orbital launches. In normal times, that would have been enough for a steady, profitable IPO. But normal times are gone.
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The Verdict
Nobody knows what will happen to the stock. The general consensus among sceptical analysts is that it will rocket up on launch day, then grind slowly downwards as investors realise what they actually bought.
Could a rabbit be pulled out of a hat? Could SpaceX rise to a $100 trillion valuation in five years? Possibly. But the smart money is on caution. The S&P 500 saw the risk and walked away. The NASDAQ did not.
For ordinary investors – the ones whose pension funds will be forced to buy shares, the ones whose 401(k)s are already exposed – this should be a wake‑up call. A corporation can disguise an AI company losing a billion dollars a month inside a perfectly healthy rocket company, sell it to the public, and get away with it.
That is not innovation. That is a financial trick dressed up as a moonshot. And when the music stops, it will not be Elon Musk left holding the bag. It will be you.
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