SpaceX: The Good, the Bad, and the Aspirational

With Elon Musk at the helm, rockets flying as frequently as commercial airlines, and plans for one million AI data centers in space, there's no shortage of excitement around the largest IPO in history. But beyond the spectacle lies a critical question for investors: Is SpaceX an underpriced generational opportunity or an overpriced gamble on multiple layers of unproven technology and an overly ambitious timeline?

The good

SpaceX is lightyears ahead of the competition – pun intended. The company holds a 5-10 year lead on reusability and launch costs with their Falcon 9 rocket. If the new Starship rocket delivers on its promise over the next 6-12 months, that advantage could extend to beyond a decade. Full rocket reusability would fundamentally transform the economics of space access, turning what's impossibly expensive into something more economical.

The orbital data center concept is where things get particularly interesting. By the end of 2027, SpaceX expects to demonstrate a proof of concept for computing infrastructure in space. The value proposition is compelling: solve AI’s growing infrastructure bottlenecks by immediately accessing the sun’s unlimited energy while also taking advantage of cooling benefits and avoiding permitting and other regulatory hurdles. It's ambitious and unproven, but the potential payoff is substantial.

There's also a built-in hedge. Along with Tesla, which some analysts and investors expect to merge with SpaceX in the near future, SpaceX is building a massive semiconductor fabrication facility: the "Terafab." Even if the orbital vision doesn't fully materialize, the company could still become one of the world's largest chip manufacturers, providing meaningful downside protection to their orbital data center efforts.

Meanwhile, Starlink continues to generate strong cash flows. The company is expanding its satellite broadband and mobile networks aggressively, creating a stable revenue foundation while pursuing more speculative ventures. This core business provides both credibility and capital to fund moonshots.

The bad

As it sits right now, SpaceX hasn’t built an orbital data center, it doesn’t have a working rocket that can send orbital data centers into space, and it has neither the launch capacity nor a global supply chain capable of creating an orbital data center constellation anywhere near the magnitude that the company is messaging to investors, especially when looking out over the next five years. 

The IPO valuation depends heavily on orbital data centers working at scale. The technology remains unproven with significant engineering challenges. Operating an orbital data center with as many GPUs as a single leading-edge rack requires as much power as the International Space Station, with solar panels approaching the size of a football field. Other challenges include solving heat dissipation in a vacuum, radiation hardening and other shielding to protect against the solar and special elements, collision risk, and managing constellation replacement when satellites fall out of the sky and disintegrate on orbital reentry every five years. These are significant engineering hurdles with uncertain timelines and costs.

Everything depends on Starship achieving full reusability. If that doesn't happen on schedule, or at all, the entire business plan timeline shifts outward – potentially by years. This single point of dependency represents considerable execution risk that investors need to acknowledge.

The supply chain requirements are daunting. SpaceX aims to launch 100+ gigawatts of orbital computing capacity annually. Even with their own fabrication facility, sourcing the necessary chips, memory, and solar panels at that scale within the proposed timeframe seems optimistic. The launch capacity required to deploy such payloads also represents a massive scaling and regulatory challenge.

In addition to all of these other hurdles, SpaceX likely won’t have enough cash post-IPO on its balance sheet to fund these efforts. The company is burning cash at an accelerating rate and will likely need multiple capital raises in the coming years. That means dilution or increased leverage risk for early investors. Something to factor into valuation considerations.

The aspirational

If SpaceX successfully deploys orbital data centers at scale, the long-term potential is extraordinary. The company has filed for one million satellites and aims to place over 100 gigawatts of capacity in space annually. Achieving this requires building a vertically integrated supply chain of unprecedented scale.

The company is also working to prove orbital refueling technology, which would unlock access to the Moon, Mars, and beyond. Success here opens entirely new markets and revenue streams that are difficult to model today but could be transformative over the long term.

Where we stand

We're constructive on SpaceX business long-term. The company combines proven execution in launch services and satellite connectivity with highly ambitious ventures in unproven technology. That warrants exposure. 

We're monitoring four key milestones: Starship achieving full reusability, successful deployment of the first orbital data center proof of concept, progress on the Terafab facility, and the company's ability to manage cash burn without excessive dilution. Our position sizing will adjust as these milestones are achieved or delayed.

Why active management matters now

Technology cycles move fast. Yesterday's market leaders can become tomorrow's cautionary tales as fundamentals shift and the market reprices risk. Passive indices are forced to buy at predetermined times, often when valuations are stretched and hype is peaking. 

SpaceX exemplifies this challenge. Index funds will add significant exposure at the IPO price regardless of valuation or execution risk. Active managers can size positions based on forward-looking risk-reward rather than backward-looking market capitalization.

During transformative technology waves like AI and space commercialization, this flexibility matters. Active management allows investors to capture upside while managing the substantial execution risks that come with breakthrough innovation. SpaceX is exciting and potentially transformative, but that doesn't mean it's investable at any price.

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SpaceX: The Good, the Bad, and the Aspirational

The good

The bad

The aspirational

Where we stand

Why active management matters now

Disclosures

Policies

The good

The bad

The aspirational

Where we stand

Why active management matters now

Disclosures

Policies

​

SpaceX: The Good, the Bad, and the Aspirational

The good

The bad

The aspirational

Where we stand

Why active management matters now

​

​

The good

The bad

The aspirational

Where we stand

Why active management matters now

Disclosures

Policies