SpaceX less attractive after index inclusion, Niles warns on $1.5T valuation

SpaceX has become less attractive after its index inclusion, with a $1.5 trillion valuation that fails to account for mounting losses, Dan Niles said.

"SpaceX's lofty valuation makes it an unattractive stock play as its growth slows and losses mount," Niles, founder of Niles Investment Management, said in a June 11 commentary.

SpaceX's AI segment generated $3.201 billion in revenue in 2025 while losing $6.355 billion from operations, according to its IPO prospectus. In the first quarter of 2026, the AI wing posted $818 million in revenue and a $2.469 billion operating loss. Morningstar analysts Nicolas Owens and Suryansh Sharma independently valued SpaceX at $780 billion, roughly half the $1.5 trillion IPO target.

The IPO, expected on the NASDAQ exchange, would be the largest in history. But Morningstar assigns a 43 percent probability to a worst-case scenario for SpaceX's orbital data center plan, which it said could destroy more than $81 billion in shareholder value.

The company's most ambitious ventures — including a planned constellation of 1 million satellites serving as orbital AI data centers — remain unproven and require heavy investment. SpaceX acquired xAI in a $250 billion transaction that Morningstar analysts called a related-party conflict given Elon Musk's control of both entities.

Musk holds more than 80 percent of SpaceX's voting power through super-voting class B shares, leaving minority shareholders with limited recourse to challenge future acquisitions, according to Brian Hurley, founder of New Space Economy. Hurley warned that a hypothetical future SpaceX takeover of Tesla could also raise related-party conflict concerns.

Hurley compared xAI's $250 billion price tag to dot-com era valuations, noting the AI business posted operating losses that substantially exceeded its revenue. "A $250 billion price against roughly $3.2 billion in annual revenue implies an extremely rich revenue multiple, especially for a business with very large operating losses," Hurley said. "That price is hard to justify on financial performance alone."

The xAI division operates the Grok large language model and a gigawatt-scale data center called Colossus, built at a cost of $50 billion. Morningstar analysts said Grok has not demonstrated significant performance advantages over leading peers such as OpenAI's ChatGPT and Google's Gemini, and that X, formerly Twitter, has seen profits decline since Musk's takeover with less than 1 percent of users on paid subscriptions.

Morningstar projects that SpaceX's Starlink broadband constellation of 10,000 satellites will remain the outfit's primary profit generator for the foreseeable future. But most of the 2 billion people on the other side of the digital divide live in low-income regions beyond Starlink's target demographic.

Niles' negative assessment from a respected fund manager could dampen investor enthusiasm for SpaceX-related exposure as the company prepares for its public debut. Hurley advised potential investors to wait out the volatile early days of trading and consider purchasing stock when insider shareholders begin selling their equity in the weeks following the IPO, predicting downward pressure as more supply reaches the market.

This article is for informational purposes only and does not constitute investment advice.