Can the SpaceX IPO justify a 20% first-day surge when forced index buying may be doing more work than fundamentals?
What Does the SpaceX IPO Mean for Index Funds?
The SpaceX IPO triggered immediate structural consequences for passive investing. Nasdaq Global Indexes slashed the time for megacap IPOs to qualify for Nasdaq-100 inclusion from three months to just 15 trading days. Similarly, the Russell Equity Index Series now permits large-cap IPOs to enter the Russell 1000 and Russell 3000 after only five trading sessions. These rule changes — absent from the S&P 500, which maintains its 12-month waiting period — force index funds, 401(k)s, and ETFs to begin purchasing SPCX shares within days. With SpaceX selling only 555.6 million shares — just 4.2% of its outstanding float — this forced buying is already amplifying price discovery. As Campbell Harvey, Professor of Finance at Duke University’s Fuqua School of Business, told Bloomberg, the combination of a tiny float and accelerated benchmark inclusion exposes ‘major flaws in index construction and passive fund buying.’
How Profitable Is SpaceX — Really?
Despite its $1.77 trillion valuation, SpaceX remains deeply unprofitable. For Q1 2026, the company reported $4.69 billion in revenue but a $1.94 billion operating loss. Its three core segments tell a stark story: Starlink (Connectivity) generated $3.26 billion and $1.19 billion in operating income — the only cash-positive engine. The Space segment, which includes Falcon 9 and Starship development, posted $619 million in revenue but a $662 million operating loss. Meanwhile, the AI segment — now housing xAI — generated $818 million in revenue but lost $2.47 billion. In 2025, SpaceX’s net loss totaled $4.9 billion on $18.67 billion in revenue. As Oppenheimer analysts noted in their initiation report, ‘the structural profitability resides in Starlink — not the vision.’
Is the SpaceX IPO Overvalued?
Yes — by historic standards. At $162.26, SPCX trades at 94x 2025 revenue, dwarfing Nvidia’s 31x and Apple’s 33x multiples. Morningstar’s Nicholas Owens valued the company at just $780 billion — 55% below the IPO price — calling it ‘significantly overvalued.’ NYU’s Aswath Damodaran estimated fair value between $1.25–1.3 trillion, describing $135 as ‘rich.’ Even with $1.25 billion/month compute contracts from Anthropic and $920 million/month from Google, SpaceX’s AI segment burned $12.73 billion in 2025 capex — more than the Space and Connectivity segments combined. As Dan Niles of Niles Investment Management stated bluntly: ‘At 90 times revenues, this is like buying the ARK Innovation ETF at its 2021 peak.’
What’s Next for SPCX Volatility?
Volatility is baked into the SpaceX IPO architecture. ProShares launched its 2x leveraged Ultra SpaceX ETF (SPCF) on day one — a product Warren Buffett would call ‘financial weapons of mass destruction’ due to daily reset decay. Leverage Shares followed with SPCH and SSPC. Meanwhile, insider lockups for early investors expire in August — just weeks after the first quarterly report. That timing, coupled with $75 billion in IPO proceeds and $26 billion in new annual compute revenue, creates a binary catalyst window. As RBC Capital Markets warns, ‘SPCX’s near-term price action will be dominated by index flows and sentiment — not fundamentals.’
How Are Competitors Reacting?
At 90 times revenues at its IPO price — over 100 based on what it looks like it’s trading in some of these other markets — it’s just not there.— Dan Niles, Niles Investment Management
The SpaceX IPO has triggered sharp divergences across the space and AI sectors. Rocket Lab (RKLB) surged 15% on Nasdaq-100 inclusion hopes, while Intuitive Machines (LUNR) and Redwire (RDW) fell 10% and 7%, respectively — signaling capital rotation, not broad sector strength. Meanwhile, AI infrastructure names like NVIDIA and Meta face mounting pressure: Oracle dropped 9% in May on rising capex, Meta slid 15% post-earnings, and Google fell 6% — all amid record AI infrastructure spending. As one institutional strategist at Truist noted: ‘SpaceX isn’t just a new stock — it’s a new benchmark. And it’s pulling liquidity, attention, and valuation premiums from the Mag 7.’
