We Think the SpaceX IPO Is Overvalued
morningstar.com
morningstar.com
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
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.
The Google founders are, lets say, more reliable than Musk when it comes to making sound business decisions.
I've no idea about that and I won't opine. But every time I see that sort of statement it seems likely motivated by the whole Twitter acquisition. Perhaps that was just a toy or vanity project for him, one he could afford, so even if you think he's running X terribly it might have nothing to do with how he's run or would run any other companies that are not related to social media. In other words, what I read into such statements is "I don't like the politics he's brought to Twitter!", "the board should rein in the guy whose politics I don't like!!". It's like saying Bezos is bad at business because he owns the Washington Post -another vanity project- and you don't like the Post.
Do people not get bored of that sort of take?
Tell me he makes bad business decisions all you want, but in the context of everyone-hates-his-acquisition-of-Twitter I'd like to hear about his other businesses. Tell me something useful, not something political.
And, sure, politics at some point bleeds into business. Maybe Trump is out to get Bezos over Washington Post coverage, or maybe the next Democrat President will go after Musk for his politics. It's possible that X will eventually cost him dearly and personally, and it's a solid argument for these billionaires and trillionaires to stay out of politics. Or maybe it's a good argument for them to stay in because maybe by demonstrating electoral influence and power they can make the POTUS-of-the-day fear them enough to not go after them too hard. But if you made any such argument it still wouldn't say tell me anything about the rest of these billionaires' businesses.
SpaceX blew up an entire launchpad because Musk thought flame diverters are gay, or something.
And, yes, Twitter is now a shithole.
Musk has a singular goal as far as I can tell: to make humanity a multi-planetary species. All of those things are testing the boundaries of what's possible in areas that will or could be very important for building a permanent settlement on Mars.
I posit that while there's much room for debate around whether or not those projects are viable, as far as I can tell everything Musk has done has been in service of building the corporate framework, talent pool, skills, and technology necessary to colonize Mars.
While my own views are likely closer to Musk's than I suspect yours are, I share those concerns. I don't think I'd be interested in moving there, at least not in the initial waves.
My optimistic view of the future looks more like "The Moon is a Harsh Mistress" than "Total Recall".
Hyperloop and the Vegas Loop are projects used to justify the existence of the Boring Company. The Boring Company's tech is definitely relevant to extraterrestrial habitat creation.
Just to add that to the crazy pile.
This is just sole proprietorship with window dressing.
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...
If you haven't wiped out their corporate savings and sent the stock price tumbling, you haven't really done anything to get the needed recompense and to discourage the behavior in the future. Right now, many companies are effectively sole proprietorships or partnerships with window dressing made to look like there's real accountability. If it becomes impossible to oust the CEO, you're not a shareholder, you're a bagholder.
What you really need are lawsuits against individuals to be held accountable, otherwise it’s a lose-lose for shareholders.
Perhaps after a few high-profile cases, IPOs won't be structured to give absolute control to one person.
That, or you make the ousting of the execs in charge the settlement instead of massive monetary damages.
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.
The point is to raise money from investors. The investors get a voice in exchange.
Fund managers and the like do, which covers a lot of passive investors, which is good until a company joins one of the major indices at which points funds may be obligated to buy in.
It's a deeply distressing moment, and I see it as a time to renew calls for consumer-protecting regulations and antitrust laws with more teeth in the markets where this kind of behaviour's currently flourishing.
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).
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.
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.
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.
You could either be 100% right, or this could be another exercise in failed human hubris.
I.e., Elon and the financial architects behind this IPO are assuming that it will work just like Tesla.
However, in the back of my mind I have to wonder if Elon has spent too much social capital for this kind of cult of meme stock strategy to work again.
This plan has potential to backfire since this unique IPO scheme became a big news story. The microscope is on the company more than it was for Tesla.
If social capital was an indicator , then Tesla stock would've cratered 2 years ago. Despite demand for tesla vehicles dropping. I don't think social capital matters these days.
SpaceX doesn’t really have those advantages from day one.
Tesla may be overvalued but I think the stock would have been negatively impacted if they spent the two years losing money.
> 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.
And yes, I don't plan to invest unless SpaceX stock somehow becomes cheap, which is very unlikely.
And yet the vast majority of addressable market they list is enterprise AI apps lol
So yeah, he’d YOLO and do the Mars trip before any of the above. Which is what most nerds on HN would love, except their blind hatred for Musk would make them despise even that.
There's no way in hell I'd even remotely consider trying to build a Mars base if i had all that money, either. It's a fucking stupid way to waste money.
Thats always been the plan.
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...
Alphabet owns some SpaceX shares, which makes Google's sudden 90-day compute contract with xAI seem a little less than coincidental
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])
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.
Edit: Actually, I didn't realize that it's being added to MSCI, so I was wrong: https://www.reuters.com/business/media-telecom/msci-confirms...
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...
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-...
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.
No there will be. But I don't think it'll be in our lifetimes.
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.
> 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.
How long will you have to wait for the spacex claims to become "not too far off now"?
They can stop building out their capacity there, if they want.
Specs: https://x.com/SawyerMerritt/status/2064108916611420273?s=20
Radiating into 300K ambient, it’s 134C. (300K ambient is about what you get if the sun is visible or if a large fraction of what the radiator can see is the Earth.)
You can slightly fudge the 300K case with a spatially or specially selective system, which would add weight and complexity. (Well, you can’t get rid of the problem of the Earth being warm by spectral selectivity — it’s the same spectrum as the radiator.) You cannot fudge the absolute zero case — the Stefan-Boltzmann law is extremely unforgiving. [0] And you need some headroom for the system that gets the cooling fluid to the radiator.
The thermal qualification temperature of an H100 is 87C and the associated HBM is 95C.
So I don’t see how this can work short of using higher-temp chips. I have no idea how SpaceX expects to source any such thing in any meaningful volume.
[0] This includes heat pumps. A heat pump makes it worse.
On the flip side of all this, the Starlink satellites work, and I would expect SpaceX to have some idea what they’re doing. Starlink satellites have largish power systems (smaller than these proposed AI satellites, but not outrageously so). They presumably turn a smaller fraction of their power into low-temperature heat: the ion thrusters and the various transmitters emit a good deal of non-thermal power. A good fraction of Starlink’s electronics way well function at rather higher junction temperatures than 100C. And I imagine that Starlink satellites are economical to operate at an average of much less than 100% power. So I don’t really know what’s going on. It’s plausible that Starlink gets away with a cooling system that’s not so great for a compute satellite.
He knew it was bullshit. He's dumber than most people realize, but he's not dumb enough to actually believe all the bullshit he spouts.
I don't get the slow roll on this thing. The stations in LA and SF are gonna end up sort of like Tokyo station for the Shinkansen. A giant mall area with a huge amount of commerce. Why isn't this thing done yesterday?
Wat? Are you talking about NACS? If so, a minority of non-Tesla EVs currently on the road use it in the US, and AFAIK zero outside of North America.
And even in the US, the vast majority of EV charging stations are AC and use J1772, a SAE standard that predates Tesla's existence.
Land rights. Environmental reviews. Various suits attempting to exert extra compensations for tangential (at best) issues. Basically the California around.
CA HSR is slow partly because the state government has limited funds and giving out slowly. The federal government should have been contributing more. The other problem is it kept getting delayed from legal issues, mainly from acquiring land. Going forward is bad because they decided to do the easy part first and leave the hard tunnels for later.
Vacuum trains are what high altitude airliners are.
The cost of the HSR is tiny and inconsequential. For the 40 million residents of California it amounts to about $20 a month over the 10 years the fund has been going. It hasn't even spent 50% of the total fund yet. If construction was even 2x the current rate we would already have the central valley done. So I know they are slow rolling it. That's my point. They can speed things up even just a little.
Whether he was the only reason for high speed rail being derailed and delayed isn't really the point. He intentionally worked against mass transit, and lied repeatedly about hyperloop as part of that.
Some people really should just rm -rf their boot disk cause I feel dumber for having read their comment.
Nobody talks about it, but my pet theory is that Trunk attacked Iran because he wanted to do it in his first terms but was stopped by his inner circle. THE Trump. Stopped. Of course he loved the idea of attacking Iran when presented to him earlier this year.
People tend to think that the powerful and rich are so much more clever than normal people so they come up with complex hidden agendas, but I didn't find it necessarily being the case.
The state government of California was doing a bang up job of destroying this project on their own. He didn't really need to help them. Moreover given the rise of remote work I'm not sure it has as much value as it would have had it been constructed when it was designed.
> but he's not dumb enough to actually believe all the bullshit he spouts.
Yet he's not afraid of the consequences either. This seems more telling to me.
He lies every day about his companies, and no one ever does a thing about it.
DOGE killed a few hundred thousand children for no reason at all; it didn't even save money. He did it purely for the joy of killing black and brown children in the global south. No one with any power to deliver has ever suggested he should face consequences for it.
Why should he be afraid of consequences? There will never be any for him, as long as he is protected by unimaginable wealth and a power structure designed around serving those with wealth.
Orbit is a bad place for a datacenter. Your equipment will be hot and bombarded with radiation. You can't do any repairs. Even with reusable rockets you still have to pay for fuel to launch everything into orbit. You get a small benefit of more efficient power generation but it's not worth all the downsides.
If you want to have solar-powered AI datacenter that you can't service, you'd be way better off building the power generation in a coastal desert and building your datacenter underwater.
With the space data centers, it’s more, “Okay yeah so let’s say you do…why?”
It just seems like a really hard thing to do when the available options are, like, the Chinese building data centers on the Tibetan plateau where it is cold, ample renewable energy, tons of land, and, like, oxygen.
If Starlink didn't exist, then it could make sense to put edge data centers in orbit. But Starlink means can put edge computing everywhere on the ground.
What could that 1,000 tonnes per year get your in terms of sell-able data center capacity, and how does that compare to terrestrial build-out time frames?
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.
"If we can just keep consuming massive amounts of capital, at some point, we'll turn a profit. Maybe even a big one."
It's not 2019 anymore, but this mindset acts like it still is.
SpaceX, along with its wanna-IPO classmates OpenAI and Anthropic, are going public because there's basically no more private investor money left and there's no political will (outside of whatever the hell is going on in Donald Trump's head) to lower interest rates to what they were in the golden age of blitzscaling.
They have to ask the public for more money. They just don't have enough humility to do it on decent terms, as evidenced by the IPO deals they're floating.
If this fails to produce what you're talking about - which is likely given things like "speed of radio transmissions", "thermal conductivity in a vacuum" and other things governed by those pesky laws of physics - the game's over.
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?
So how do you remove megawatts of heat in 0K?
IMO, that lines up with a weird remark from Musk around stealth jet obsolescence few years ago, and makes sense.
It’s the exact tactic he used with California HSR
They’re not launching something the size of a building!
It's just a wildly expensive bad idea, and it is obvious to anyone that understands how much it costs to put things in space. A man who runs a rocket company knows how much it costs. He knows it's dumb as hell. But, he also knows the average investor is even dumber, because TSLA still trades at ~357 PE.
Having said that... it might justify the valuation if every other data centre build-out gets blocked by insufficient power supply.
Might.
I think the only way compute in space works out financially is if there's so much bulk data already up there that downlink bandwidth becomes a serious bottleneck.
Ok. And why does it follow from this that the physics of an orbital data center makes no sense?
The construction of the building w/ zoning and the political fights and utilities arguments and years of time and whatever is what is being dealt with by putting it in orbit.
And then when you build on the ground you could even send people to it to swap hard drives and GPUs when they inevitably fail or upgrade them to keep them current. At lower rates of failure than they would in space because we have a planetary magnetosphere protecting us from cosmic rays.
It implies that China, which can cut through much red tape and has great (and improving) utilities and infrastructure, lots of energy, can just build normal datacenters and save the cost of dozens of space flights.
That's assuming he can get launches down to $10 million which I'm sure will be right behind his flying roadster and cybertruck boat
A very large 1,000,000 sqft data centre is therefore $100 million.
[1] https://www.globaldatacenterhub.com/p/can-elon-musks-7b-colo...
Even if you pay a bit more to position them in a higher, more stable orbit, you still can’t physically get to them to repurpose equipment.
Check this datacenter gadget out:
https://www.marvell.com/blogs/sustainable-computing-with-cxl...
That trick is a complete nonstarter if the modules you’re trying to reuse are in space.
Still not going to be cheaper, but if you get moderately optimistic it's cheap enough to maayyyybe start looking like a source of demand for starship if you can find suckers (government) to pay 10x the price per compute.
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.
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.
"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.).
You and I and a million other people might run away from Tesla's valuation but that doesn't mean that the market must.
I think it's very obvious that the historical norms that governed and explained pricing in the stock market no longer apply, for better or worse. Between the massive manipulation of the markets by central banks to the rise of the retail investor (and social media, meme stocks, etc.), there are a lot of factors in play that weren't a thing 30 years ago.
Markets allow people to bet on it. So one would assume the author is taking the revenue from his $70/year subscriptions and shorting the bubble he sees (or at least positioning himself to do so).
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.
It's better than what preceded it but we still manage retirement wealth poorly.
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.
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.
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.
As an example here, in the 2022 (relatively mild) stock market downturn, when the S&P 500 gave back about 20%, TSLA dropped from a peak in the low 400s, to a low of 122... roughly a 70% drop peak to peak. It's back to ~400 now, and it could go higher again. But, in the next downturn, it could go a lot lower.
“When the tide goes out we will find out who has no shorts on.”
The rest of the world wants dollars, and as long as they do, the US benefits massively from that demand, and it would be foolish not to satisfy that demand, as it's pure benefit to the US.
It seems that many are devoted to ending the status of the dollar as the reserve currency of the world, but it's a strange and subversive thing for any US resident to want or desire.
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.
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
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.
Why not build off-grid?
> There's also a populist revolt against DCs and the infra upgrade costs being dumped on ratepayers.
What about the other 94% of the Earth's landmass?
He sort of is. I believe people aren't very happy with his gas turbines powering Colossus near Memphis. There's also currently a >5 year backlog for nat gas turbines for combined cycle plants.
Solar takes up an enormous amount of space to get to reasonable base load, because you have to massively overpanel in order to carry it through winter. You need a large multiple of the panels you'd need in space to get to reliable baseload, plus batteries. During grey winter weeks, our home array is frequently making like 1/6 what it does during summer, and even summer days have night/weather/etc compared to sun sync orbits.
Nuclear is hilariously expensive and slow to build. But I have some hope for small reactors and Commonwealth Fusion Systems/Helion.
>What about the other 94% of the Earth's landmass?
Geopolitical concerns, infrastructure/power availability, security, since these things are full of incredibly valuable hardware.
The market decides that, not Elon. Do customers want to pay $X for compute in Iceland (or wherever), or do they want to pay $kX for compute in space?
What premium are customers willing to pay for compute in space? I would guess that the premium is actually negative because the quality of computation in space is worse than under the sweet embrace of Earth's atmosphere which provides a natural protection against radiation.
I wouldn't take that bet, but I can see why some people would.
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.
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.
I don’t think I have ever seen this before.
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.
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.
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.
Where I live in New Zealand the only good internet provider is Starlink, so all my internet is through Starlink. The latency is about 20ms, so while yes you are technically correct that is 10x slower then 2ms, it isn't a major deal breaker.
You are probably thinking about light and fast API calls, where latency is more noticeable. But if you are doing an inference or LLM job that is going to take several seconds of token generation before the full response is available then the difference between 3.002s and 3.020s is negligible.
> build some data centers underground in deep fortified bunkers if you want.
This is the defensive build. The US has a tendency to optimize for offense.
Let's roll forward another few decades, and imagine a classic dystopia scenario: pervasive worldwide surveillance systems, armed drones and robots everywhere, etc. Where does the data from those surveillance systems get crunched, and where do the drones and robots get controlled from? Probably not from one central system in one place. That would ironically be too high latency. These systems would most likely end up as generic shells with minimal on board smarts, controlled by AI "brains" up in LEO, 20ms away via radio. The AI observes from overhead via it's surveillance systems, and it acts via it's robot bodies down on Earth.
It sounds like sci-fi, but you have to remember the world is full of megalomaniac nerds. They love this type of stuff, and if they think someone might be able to build it, then they want to be the one to build it.
But then I go back to my original question where I ponder whether that vision results in a gigantic company.
I look at some of the contracts I found some news articles about: Space Force has a $437 million (not billion) contract with ViaSat and SES, the Pentagon is said to be spending $13 billion on LEO satellite programs.
And we can’t forget that SpaceX doesn’t actually make any of the robots. They only make the communications stack.
AT&T has a market capitalization of about $150 billion, for comparison.
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.
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.
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.
How easy is jamming starlink? I don't think it is as easy as jamming gps. As I've seen numerous warning from Russia that they providing starlink to Ukraine is bad idea. That they're going to shut it down etc. But, starlink is still being used in Ukraine.
Prior to these events, the prevailing consensus in the defense community was that Low Earth Orbit (LEO) satellite constellations like Starlink were nearly impossible to jam effectively. Their defense relied on the satellites' constant rapid movement and their ability to "frequency hop" to avoid static interference. The blackout in Iran has shattered this assumption.
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.
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.
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.
Totally fair - and with Star Shield and basically SpaceX being the only reasonable launch provider, and a Musk-Friendly government currently in the executive… then I think my thesis holds. The only people who can tell SpaceX no at that point are like 3 nation states with ASAT capabilities?
Regardless, he won’t have to ask the “city” counsel of Asslick Indiana if he can “please build here pretty please!”
Mark my words, they’re going to build “up.l
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.
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.
This article is just about the making money part.
[0]: which obviously provide some revenue, but much less than the value provided.
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.
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?
> 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...
Shouldn't your concern be whether it's true? Who asks to be "convinced?"
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.
https://www.bloomberg.com/news/articles/2026-06-08/spacex-ip...
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.
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.
This isn't different than any other tech IPO in the last 15 years.
No wonder they think it's "over valued"
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.
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.
...from the pages of Duh Magazine
otherwise using ROIC or CAGR might be more optimal way to evaluate your investments
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.