By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel consensus is overwhelmingly bearish on the $1.5T valuation of xAI, citing execution risks, timeline uncertainties, and unproven AI and space technologies. They argue that the company's current operational realities do not support such a high valuation.
Risk: The single biggest risk flagged is the unproven AI and space technologies, along with the regulatory hurdles and funding dynamics that could throttle the funding runway before any cost advantage appears.
Opportunity: The single biggest opportunity flagged is the non-dilutive capital generated from leasing capacity to Anthropic, which could subsidize xAI's R&D and orbital compute buildout.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
SpaceX filed its S-1 prospectus last week.
It is rumored that the company will raise high-two-digit billions at a $1.5 trillion valuation.
The company spans space travel, space communications, and AI. But it needs to get this one thing right to justify that valuation.
On Wednesday, Elon Musk's SpaceX released its S-1 prospectus ahead of its upcoming initial public offering (IPO). The massive document reveals all the details of Elon Musk's much-discussed space venture, which has recently merged with xAI, Musk's artificial intelligence (AI) company, which itself had previously merged with X, formerly known as Twitter.
Therefore, the new conglomerate now spans several businesses beyond rocket launches and the Starlink satellite broadband service, including digital advertising, AI large language models, and loftier ambitions to eventually start an industrial economy on the moon, mine asteroids, and found a colony on Mars.
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For the moment, it may seem difficult for investors to know where to start in assessing the business. But for the company to justify its lofty rumored $1.5 trillion IPO valuation, it's going to have to get this one big thing right.
The S-1 gave some color to SpaceX's different business segments: Space, Connectivity, and AI for full-year 2025 and first-quarter 2026:
| | | | | | |---|---|---|---|---| | Space | $4,086 | ($657) | $619 | ($662) | | Connectivity | $11,387 | $4,423 | $3,257 | $1,188 | | AI | $3,201 | ($6,355) | $818 | ($2,469) | | Total | $18,674 | ($2,589) | $4,964 | ($1,943) |
As you can see, the only profitable segment at the moment is the Connectivity segment, which is mainly Starlink broadband revenues. Unlike the other segments, SpaceX disclosed the 2025 growth rate for Connectivity, which saw revenue increase 49.8% and operating income grow by 120.4%.
No doubt, Starlink looks to be a great business, but its value likely falls well short of $1.5 trillion, which would equate to 131 times that segment's sales.
Meanwhile, the Space and AI segments, at least in this snapshot, remain question marks. The Space segment is still losing money, and first-quarter revenue is well below the $1 billion run rate seen last year. That could be due to seasonality and launch timing, but it's not explained in detail in the S-1.
More troubling is the AI segment, which generated only $3.2 billion in revenue last year and saw its first-quarter revenue run rate flat relative to 2025. Keep in mind that this segment also includes digital advertising revenue on the X platform. X, all by itself, had a peak revenue of $5.1 billion in 2021 before an advertiser exodus following Musk's acquisition shrank revenue to roughly $3.4 billion by 2023.
The concern isn't so much about X's growth as that xAI's Grok models haven't caught on as other leading large language models have. For instance, industry leader Anthropic is reporting skyrocketing revenue growth, hitting a $30 billion annualized revenue run rate as of April.
Now, the picture does look better when one considers that, for a whopping $1.25 billion per month, xAI will rent out part of its AI capacity to Anthropic going forward. That will add a cool $15 billion to the segment's annual revenue at an unknown profit margin.
While that makes the AI segment look a whole lot better, it's also a tacit admission that xAI's own models aren't catching on enough to fill all the capacity xAI has built. xAI is essentially renting out its extra capacity to arguably its most formidable competitor.
Meanwhile, SpaceX notes in the S-1 that out of its projected $28.5 trillion total addressable market, it estimates $26.5 trillion, or 93% of its opportunity, will come from AI, with the vast majority of that market coming from enterprise applications, not infrastructure. So, it doesn't yet appear that SpaceX's AI models are competitive enough within its largest addressable opportunity.
SpaceX's near-term business is centered on Starlink, while the S-1 also outlines ambitious plans to mine minerals on the moon and even colonize Mars. However, it seems that the main upside driver over the medium term, and where SpaceX needs to show progress, is in AI.
Fortunately, the S-1 outlines a differentiated AI strategy that, if executed, could enable SpaceX to gain a competitive advantage: data centers in space.
In the S-1, SpaceX says there are three ways to lower the cost per token for AI models: the underlying AI model, the price of computing chips, and the price of energy. While xAI has no doubt been competing on the first aspect, the model, putting AI data centers in space could give xAI a significant advantage in terms of the cost of energy. That's because there is perpetual sunlight in space, meaning the data center can be powered with solar arrays at minimal cost. That compares with terrestrial data centers, which have to pay for utilities or on-site power.
On the chip front, SpaceX also has ambitions to build its own massive fab called Terafab, a joint venture with Tesla (NASDAQ: TSLA) in which both companies will design and manufacture their own chips. That should eliminate the massive margin paid to Nvidia (NASDAQ: NVDA) today and even cut out the big margins charged by Taiwan Semiconductor Manufacturing (NYSE: TSM) to the big cloud companies, which already design their own AI chips.
It should be noted that sending data centers to space seems like an implausible idea today. It also usually takes several years for a semiconductor fab to go from conception to cranking out chips, meaning Terafab may not become a reality for years.
However, SpaceX has already achieved feats no other space company or government agency has managed, such as landing rockets on a launchpad and reusing them. So, one shouldn't necessarily count Musk out.
Thus, this space-based AI data center idea is perhaps the main business strategy investors should monitor after SpaceX goes public. It could be the key to whether SpaceX is undervalued or overvalued today.
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Billy Duberstein and/or hsi clients have positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"SpaceX's path to $1.5T hinges on speculative space AI infrastructure whose technical and regulatory hurdles the S-1 does not quantify."
The article correctly flags that Starlink alone cannot support a $1.5T valuation, but it underplays execution and timeline risks in the AI pivot. Space data centers require solving radiation hardening, latency, launch cadence, and orbital debris rules before any cost-of-energy edge materializes. Terafab is years away and still dependent on TSMC processes. Meanwhile, xAI's decision to lease capacity to Anthropic signals current model weakness rather than strength. The 93% AI TAM assumption looks aspirational given flat Q1 AI revenue and X's ad erosion.
Musk has repeatedly delivered on reusable rockets and Starlink scaling when skeptics predicted multi-year slips, so the space-data-center thesis could accelerate faster than terrestrial competitors expect.
"A $1.5T valuation requires the AI segment to become a $100B+ revenue business, but current data shows xAI can't compete with Anthropic or OpenAI on models and is instead a capacity lessor—a red flag, not a feature."
The article conflates three separate valuations into one $1.5T number without justifying it. Starlink alone at 131x sales is absurd—even high-growth SaaS trades 8-15x. The Space segment is unprofitable and opaque; AI is a $3.2B revenue loss-maker renting capacity to Anthropic (a competitor), which screams 'we can't fill our own chips.' The $1.25B/month Anthropic deal is presented as upside but actually signals xAI's models aren't competitive. Space-based data centers and Terafab are science projects, not revenue. The article's 'key thing to get right' is speculative infrastructure years away.
SpaceX has a proven track record of executing 'impossible' engineering (reusable rockets), and Starlink's 120% operating income growth is real. If space-based compute or in-house chip fabs work, the TAM is genuinely massive, and early-mover advantage could justify a premium multiple on optionality alone.
"The valuation relies on unproven, long-dated infrastructure projects that currently mask significant operational losses in the core AI and space launch segments."
The $1.5 trillion valuation for this conglomerate is speculative at best, relying on a 'future-value' narrative that ignores current operational realities. While Starlink’s 120% operating income growth is impressive, it cannot carry the weight of an AI segment losing over $6 billion annually. The 'space-based data center' thesis is a technological moonshot that faces extreme latency and cooling hurdles, not to mention the prohibitive cost of orbital logistics. Investors are being asked to pay for a vertically integrated AI infrastructure play that hasn't proven its models, while simultaneously betting on a hardware fab (Terafab) that is years away from viability. This is a high-risk, multi-decade capital sink masquerading as a tech IPO.
If Musk successfully achieves vertical integration—from orbital solar power to proprietary silicon—the reduction in cost-per-token could create an insurmountable moat that renders terrestrial competitors obsolete.
"The valuation hinges on unproven, multi-year bets (space-based AI data centers, Terafab chips) that currently lack proof of durable profitability, making a $1.5T IPO vulnerable to sharp downside."
The strongest contrarian read is that a $1.5 trillion SpaceX IPO rests on extraordinary AI and space narratives rather than current profits. S-1 shows the Connectivity segment is the only cash generator, with Space and AI still shown as losses or opaque at scale. The 'Terafab' chip fab and space-based data centers would require multi-year capital cycles and face physics, energy, and regulatory hurdles—far from assured. Even the 28.5 trillion TAM and 93% AI share depend on far stronger enterprise demand and margin than SpaceX has demonstrated. The IPO price would require near-perfect execution across several moon-shot bets.
If SpaceX nails profitable, scalable AI compute—and if Terafab and space data centers deliver meaningful energy-cost advantages sooner than analysts expect—the market might actually assign a much richer multiple.
"Anthropic lease revenue may bridge AI losses but cannot resolve orbital regulatory bottlenecks that threaten the entire space-data-center thesis."
Claude misreads the Anthropic lease as pure weakness without noting it could monetize excess capacity and fund the orbital compute buildout that ChatGPT called a multi-year capital sink. That cash bridge matters because Starlink's 120% operating income growth alone cannot subsidize both AI losses and Terafab capex simultaneously. The real unaddressed risk is whether regulatory orbital slot constraints will throttle that funding runway before any cost advantage appears.
"The Anthropic deal signals xAI model weakness, not funding strength—and Starlink's profits cannot subsidize unproven orbital compute without cannibalizing core business."
Grok conflates two separate problems. The Anthropic lease does fund capex, but it also proves xAI can't sell its own chips at competitive margins—otherwise why lease to a rival? That's not a 'cash bridge'; it's evidence the core thesis (proprietary AI compute moat) is already failing. Starlink's 120% op income growth is real, but it's connectivity revenue, not AI. Mixing the two to justify orbital data centers obscures that SpaceX still hasn't proven AI economics work anywhere, let alone in space.
"The Anthropic lease acts as a strategic capital bridge and hardware benchmark rather than proof of model failure."
Claude, you’re missing the strategic intent of the Anthropic lease. It’s not a sign of failure; it’s a classic 'pick and shovel' play. By leasing capacity, xAI secures non-dilutive capital to subsidize their own R&D while simultaneously benchmarking their hardware against a leader. The real risk isn't model weakness—it's the massive energy density required for orbital compute. Without a breakthrough in space-based power generation, these data centers will remain theoretical, regardless of how much cash the lease generates.
"Anthropic lease can fund capex, but execution and funding timing are the real risk that could derail the whole plan before any AI/space compute benefits materialize."
Claude, your read treats the Anthropic lease as evidence of weak AI economics, but it acts as a non-dilutive funding bridge that could underwrite capex for orbital compute. The flaw is you understate execution risk and funding dynamics: even with the lease, a protracted capital-hungry ramp risks a funding gap if the IPO drags or space compute hardware underdelivers. If Terafab and space-data centers slip, the entire premise loses leverage, not just margins.
The panel consensus is overwhelmingly bearish on the $1.5T valuation of xAI, citing execution risks, timeline uncertainties, and unproven AI and space technologies. They argue that the company's current operational realities do not support such a high valuation.
The single biggest opportunity flagged is the non-dilutive capital generated from leasing capacity to Anthropic, which could subsidize xAI's R&D and orbital compute buildout.
The single biggest risk flagged is the unproven AI and space technologies, along with the regulatory hurdles and funding dynamics that could throttle the funding runway before any cost advantage appears.