NYU Stern professor Aswath Damodaran, known as the "Dean of Valuation," has expressed significant skepticism regarding SpaceX's anticipated Initial Public Offering (IPO) valuation of approximately $1.7 trillion, specifically citing concerns about its artificial intelligence (AI) segment. While acknowledging the quality of SpaceX's core businesses like space launch and satellite communications (Starlink), Damodaran values the company at $1.2 trillion to $1.3 trillion. He increased his long-term AI revenue target to $160 billion but conversely lowered the AI segment's operating margin forecast to 25% due to competitive pressures and high capital expenditures.
The primary point of contention for Damodaran is the estimated Total Addressable Market (TAM) for SpaceX's AI business, xAI, which an IPO prospectus values at nearly $26 trillion within a total company TAM of $28.5 trillion. Damodaran dismisses this as bordering on "fantasy," stating it "represents reaching the end of what's plausible and pushing beyond." He suggests a more realistic long-term AI market opportunity is closer to $3-$4 trillion, arguing that such inflated TAMs serve as a marketing exercise to justify high valuations.
Damodaran highlights that the IPO price of $135 per share, valuing SpaceX at roughly $1.77 trillion ($1.8 trillion according to some reports), makes it "too richly priced for my tastes." He believes that investors buying at this price are making a "loaded bet on AI and Elon Musk." While he doesn't predict an immediate stock drop due to investor enthusiasm and AI optimism, he would consider buying if the price decreases sufficiently. His valuation incorporates $75 billion in IPO proceeds, accounting for $2.6 billion in operating losses and a $5 billion net loss, and capitalized research and development expenses, leading to an estimated $4 billion in earnings before interest, taxes, and R&D for SpaceX.
