The SpaceX IPO could become the biggest IPO in history, with a valuation approaching $1.75 trillion. But before we invest, we wanted to look past the headlines and ask a simple question: What would have to be true for this valuation to make sense?
In this video, we examine 10 things investors must believe before buying the SpaceX IPO—from Mars colonies and AI data centers in space to Starlink, Starship, and Elon Musk's vision for the future. Is SpaceX the investment opportunity of a lifetime, or are investors paying today for a future that may never arrive?
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Freakonomics: https://amzn.to/2HCnDeJ
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Segment 1 (00:00 - 05:00)
Only buy the SpaceX IPO if you believe in these 10 things. If you don't things, leave it alone. Because I am getting frustrated with all of the people talking about this IPO, and they know nothing about it. Well, we did something that most people have not done. We have read the IPO filing. So, we know exactly what we're buying into if we choose to invest in it. And so, today we're going to make the answer easy. Hey guys, it's Amon — and Christina — from Our Rich Journey. — Today, we're talking about the SpaceX IPO. But, you know, this is a part of a special mini-series that we are bringing to you where we are going to talk about the three hottest upcoming IPOs and telling you which one of these three we are going to invest in. Today, we're talking about SpaceX, but we're also going to be talking about OpenAI and Anthropic. — So, let's focus on SpaceX for this video. We have 10 things you must believe in if you are going to invest in SpaceX's IPO. Belief number one is you believe that SpaceX can become one of the biggest companies in human history. — This is the most eye-popping thing from the IPO filing. When SpaceX submitted its filing, it said that one day in the near future, when everything is being sold at its top peak performance, it is going to generate 28. 5 trillion dollars a year in revenue. 28. 5 trillion dollars. — So, just to give you some perspective, the US economy is around 31. 8 trillion dollars annualized, and that includes every restaurant, every hospital, every car company, bank, software company, every farm, every construction company, every business in America. Now, SpaceX is saying that its future opportunity is in that universe. Now, it doesn't mean that SpaceX will actually make $28. 5 trillion, but it does tell you how big the dream has to be in order to justify the IPO. — Now, remember, SpaceX is targeting an IPO of $1. 75 trillion. That would make SpaceX IPO one of the biggest IPOs in the history of the stock market. And to have such a high IPO price, you have to have some very ambitious money-making goals. And so, when we saw this in the filing, we thought, "If anyone is going to invest in SpaceX, they have to be able to believe that. " — So, that is a massive belief. On to belief number two, you have to believe that SpaceX is an AI company now. — Now, this is something I think a lot of people are confused about. If you have not read the IPO filing, you would be thinking that SpaceX is filing as a space company or a satellite company, Starlink, sending payloads to the moon, all of these things that have to deal with space. But, when you look deep at the IPO filing, you realize that the majority of SpaceX revenue is going to be coming from AI. — So, of the $28. 5 trillion of future opportunity with SpaceX, they are saying that $26. 5 trillion is going to be tied to AI. So, that means over 90% of the future story is with AI. So, the question is not just, do you believe in SpaceX? The question is really, do you believe that SpaceX is going to be a dominant AI company? — And this really matters, not just because of the price tag, that matters because the AI business is not some proven money-making machine yet. It's losing billions. It's expensive, it requires enormous compute, and SpaceX is basically saying, "We're not just going to dominate space, we're going to dominate AI, too. " That's a big leap. And when you look at the amount of money that they are saying they are going to make in AI, trillions and trillions of dollars, if you believe that, then by all means invest in SpaceX. — Which brings us to belief number three. You believe that today's billions in losses are worth tomorrow's trillions. Now, let's compare SpaceX to the companies it wants to be valued beside. So, Apple makes massive profits, Microsoft makes massive profits, Nvidia, Google, they also make massive profits. SpaceX lost nearly five billion dollars last year. And I know what some people will say, "Amazon lost money for years. " True. Tesla also lost money for years. But, here's the difference. Amazon was
Segment 2 (05:00 - 10:00)
losing money building warehouses, logistics, and cloud infrastructure. Tesla was losing money building cars and factories. SpaceX is losing money while asking investors to believe in reusable mega rockets, global satellite internet, orbital AI data centers, and a city on Mars. — And see, that is a different kind of bet. Because you have to believe that today's losses are temporary. I mean, it does take money to build rocket infrastructure, AI, but you have to be able to see the light at the end of the tunnel when you are investing in a company like this. One day, will they be a profitable company at the same level as these other companies? But see, the issue is you're not buying a clean profit story. There is a lot of murky and gray areas. So, how they get to this huge profit potential is still something that is not very well understood. Which brings us to belief number four. You believe that AI data centers belong in space. Now, this sounds really cool in theory, but in practice, this starts to get really complicated. Yes, there are currently AI data centers in space, but not at the magnitude that SpaceX is talking about. We are talking about a lot of data centers floating around space. Now, this sounds cool because you can have solar power. It's out of the way. No one has to technically look at it. But, if you dig deeper, how does this really happen in practice? How do you cool servers in space? How do you repair them? What happens when something breaks? What happens with space debris, latency, and can launching data centers become cheaper than actually building them here on Earth? This is a question I need answers to because this is a future business practice that is being priced into the IPO today. Now, let's talk about belief number five. You believe Starships actually work. This is probably the strongest belief you have to have because for a lot of these things to work, for SpaceX to be successful with AI, with building colonies on Mars and on the moon, you have to believe that the Starships are going to be successful. — Now, this is true because almost every major future promise depends on one thing, which is Starship. So, Mars depends on Starship, next generation Starlink depends on Starship, space-based data centers and bigger government contracts, they both depend on Starship. So, the entire future story depends on Starship becoming cheap, reliable, reusable, and powerful. — You see, for me, the entire IPO is based off of Starship being proven technology and the system working without a quirk. You see, the IPO is priced like Starship is already a proven transportation system, but it's not. SpaceX says Starship will eventually carry around 100 metric tons to orbit in a fully reusable mode. — But, the problem is that the next-generation Starlink satellite math raises questions. So, if each satellite weighs around 2,000 kg and SpaceX wants to launch 60 at a time, that's 120 metric tons. But, Starship is supposed to carry about 100 metric tons. Maybe the satellites get lighter, maybe the final design works, maybe the numbers change, but right now, the math does not clearly add up. And when a $1. 75 trillion valuation depends on the rocket working, investors need way more than just a good vibe. — Oh, number six. This is my favorite one that you have to believe in. You have to believe that Mars becomes an economic business. Because this is the part that gets people emotional. Elon Musk has been talking about making humanity multiplanetary for years. And listen, as a vision, it's inspiring. But, from a business standpoint, it calls a lot to question. I mean, how does Mars make money? Mars has no breathable air, the average temperature is around -80° F, the atmosphere is extremely thin, radiation is a major problem. I mean, no one has talked about the effects living on Mars will have to humans. Food would need to be grown in a controlled environment. Habitats may need to be underground. Water would need to be extracted. Oxygen would need to be produced. And you can only launch efficiently to Mars every 26 months. So, what type of airline only sends flights every 2 years? From a practical standpoint, from a business model
Segment 3 (10:00 - 14:00)
standpoint, it's not adding up. So, even if SpaceX gets people to Mars, how much are people going to pay? How are they going to produce money from those people? What's the business model of Mars? Where is the economy? — This leads us to belief number seven, where you believe that Elon's deadlines are finally going to hit. — I love this one because if Elon says it's going to happen next year, that means it has to happen next year. Not the year after that, and then if you have been following the SpaceX story, you have heard a lot of deadlines about when we're going to have people living on Mars. And when you have a publicly traded company, you have to be held accountable for the dates that you put out there. And when you start to miss those dates, when you're not hitting your deadlines, the stock will be penalized. And so, if you're going to invest in SpaceX, you better believe strongly that when the CEO says we're going to do something by this date, it's going to happen. If you don't believe that, again, you may not want to invest in SpaceX. Now, let's talk about belief number eight. You believe Starlink can become much bigger. Now, Starlink is really SpaceX's bread and butter. It is their most successful business, satellite internet. It makes around $11 billion a year, but the problem is SpaceX's ambitions mean that Starlink has to take over existing internet that's already here on Earth. That's fiber. That's 5G. That's all the stuff that we're using right now. Elon and SpaceX are saying that Starlink is going to take that market share. I mean, Starlink is amazing for rural customers, ships, planes, developing markets, disaster zone, government and defense. But for the everyday person, Starlink is not that great and it's not as fast as regular internet. — Belief number nine is that you believe that shareholders don't need control. Now, this is a part that retail investors often ignore. Elon Musk is to retain 80% of voting power. That means if you buy stock, you own shares, but you don't really get to control anything. So, if Elon Musk decides he wants to invest in Mars, he can just do it. If he wants to pour more money into AI, he can do it. You are basically saying to Elon, "Elon, I trust you. You can take the wheel. " — You can buy whatever you want to. If you want to acquire another company, you can because as a shareholder, you don't have any say because at the end of the day, Elon has all of the power, all of the voting decisions, everything. And don't try to sue him because he also has stipulations when it comes to that as well. When you are a shareholder in a typical company, shareholders get to vote. There is a board of directors that people appoint other people on. But if Elon is the one and only person with all of the control, how does that work? If you have full faith in Elon and you believe that he is going to take the company in the right direction, then by all means invest in SpaceX. But if you have questions or issues, you may want to think twice about owning this company and thinking you have a say in it. Which leads us to our final belief number 10. You believe that Elon sees the future better than anyone else. At the end of the day, this is the real investment thesis. Not AI, not rockets, not Mars, it is Elon. — You are investing with or in Elon Musk. The vision for SpaceX can really be whatever Elon wants it to be when you are investing in this company. And now, to be fair, Elon has proved a lot of people wrong with his other companies. With Tesla, with SpaceX, but he has also been proven wrong with some other companies like The Boring Company. And I think X is still kind of up for debate. Whatever the case may be, he doesn't have a always right record. But if you believe that he will be right more than he is wrong, then maybe SpaceX is the company for you to invest in. Now, to the ultimate question at hand, is this one of the three IPOs that we are going to invest in? It is not. — Now, that doesn't mean that this company could have some short-term wins with all the volatility once this IPO opens, but we think long-term this is not a company that we want to invest in. Of course, these are just our own preferences again based off of our 10 beliefs. It's up to you to do your research. But if you like this video, make sure you give us a thumbs up, subscribe to our channel, and join the journey.
