Finance

Morningstar's recent valuation of SpaceX at $780 billion has sparked considerable discussion, placing it substantially below the company's anticipated initial public offering target. This analysis, based on a discounted cash flow model, suggests that the market may be overestimating SpaceX's worth. While acknowledging the strength of its core businesses, the report raises concerns about the speculative nature of its AI ventures.

Detailed Report on SpaceX's Valuation Ahead of IPO

In a significant development for the aerospace and technology sectors, financial research firm Morningstar, headquartered in Chicago, Illinois, recently released its valuation of Elon Musk's Space Exploration Technologies Corp. (SpaceX). On Tuesday, June 2, 2026, Morningstar assessed SpaceX's total value at $780 billion. This figure stands in stark contrast to the company's internal target of $1.75 trillion for its upcoming initial public offering (IPO), and also falls notably below the $1.53 trillion valuation it commanded in its most recent private funding round on secondary trading platforms like Forge Global. Nicolas Owens, a leading equity analyst at Morningstar, indicated that this discrepancy suggests a significant overvaluation for SpaceX in the current private market, advising investors to seek more attractive entry points post-IPO.

Morningstar's valuation model dissects SpaceX into several key components. The primary revenue drivers, encompassing its space launch services and the Starlink satellite internet constellation, were collectively valued at approximately $611 billion. A further $170 billion was attributed to SpaceX's emerging artificial intelligence division. This AI segment includes the development of the xAI large language model, the Colossus data center project, and the social media platform X. However, Owens expressed reservations about the AI division, particularly noting that xAI's chatbot, Grok, does not currently rank among the top-tier AI laboratories. He also highlighted the inherent risks associated with unproven concepts such as orbital data centers and the intense competition from established players like OpenAI and Anthropic, leading Morningstar to assign a 'narrow economic moat' rating to SpaceX overall.

Despite these reservations, the Starlink business unit was identified as SpaceX's most formidable asset and the principal catalyst for its competitive edge. In 2025, Starlink reportedly generated $11.3 billion in revenue and over $4.4 billion in operating income. Furthermore, SpaceX's launch services dominated the global market, accounting for 83% of all mass delivered to orbit, with an impressive 165 successful launches conducted within the same year.

Looking ahead, a roadshow for the SpaceX IPO is slated to commence on June 4, with shares expected to begin trading on the Nasdaq exchange by June 12. While Morningstar cautioned against the current high valuation, it also acknowledged the potential for initial price strength due to a limited supply of shares at debut. The offering boasts the backing of major financial institutions, including Goldman Sachs, Morgan Stanley, BofA Securities, Citigroup, and J.P. Morgan. Nonetheless, the firm warned of potential selling pressure in the months following the IPO as lockup periods for existing shareholders expire.

This detailed valuation by Morningstar serves as a crucial point of reference for prospective investors, offering a tempered perspective amidst the high expectations surrounding one of the world's most ambitious private companies. It underscores the importance of scrutinizing long-term fundamentals over current market exuberance, especially in highly innovative and rapidly evolving sectors like space technology and AI.

My prior investment advice, often geared towards younger investors with long-term goals, centered on a straightforward strategy of investing in broad market index funds like VOO and QQQ. However, current market dynamics, particularly concerning valuations and portfolio concentration, necessitate a reevaluation of this approach. The landscape has evolved to a point where simply holding these ETFs no longer aligns with an optimal risk-adjusted return strategy.