SpaceX could become a great company

SpaceX is likely to be one of the great companies of the 21st century. At the current valuation, that may already be priced in — and then some.

Results this week beat expectations, yet the stock sold off on capital expenditure concerns. At a $1.5 trillion valuation, even the most optimistic revenue growth scenarios put the stock at roughly four times 2030 revenues. Before the current bubble, that figure would have been considered extraordinary for any company at any stage.

The standout in SpaceX results was Starlink, the satellite communications network, which posted strong growth in subscribers, revenue, and profit. Musk hinted, characteristically, that Starlink could become the internet provider for more than half of the planet. That ambition requires a fleet of next-generation V3 satellites in low-earth orbit, deployed via the new Starship platform which allows for larger payloads and faster launch cadence. If the rollout proceeds on schedule, Starlink could begin competing for mobile traffic and other higher-value service categories by end of 2027.

Starship itself remains a work in progress. Launch number 14 is imminent, with another attempt to catch the returning vehicle in the mechanical arms of the launch tower — the key to full reusability. Heat shield durability remains unsolved. If Starship cracks these problems, the economics of getting to orbit changes permanently. If it doesn't, the capital expenditure projections become very difficult to justify.

Those projections are staggering. SpaceX currently spends $72 billion annually on capital expenditures. That figure is expected to rise to hundreds of billions per year for several years, driven by AI infrastructure and Starship development. Company revenues almost doubled in the most recent period, but cash burn ran at approximately $15 billion. Musk has always been comfortable with negative cash flow when the spending builds long-term assets — and SpaceX, unlike OpenAI, Oracle, or Anthropic, will have little trouble raising capital through debt or equity issuance.

But two questions loom over the bullish case. First, what is the profitable business model for AI — for SpaceX or anyone else? Second, does the current valuation leave any margin for error?

History offers a relevant parallel. When the dot-com bubble burst in 2000, great companies like Amazon and Microsoft lost more than half their market value before going on to become the defining businesses of the era. The lesson is not that SpaceX will fail — it almost certainly won't. The lesson is that even transformational companies are not immune to valuation corrections, and that the current market is assigning transformational-success prices to the entire technology sector simultaneously.

SpaceX, Apple, Nvidia, Amazon, Alphabet, Microsoft, Meta, Tesla — the entire constellation of trillion-dollar companies shares this vulnerability. The business cases are real. The prices assume perfection.

Hilliard MacBeth

 

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Richardson Wealth Limited is a subsidiary of iA Financial Corporation Inc. and is not affiliated with James Richardson & Sons, Limited. Richardson Wealth is a trade-mark of James Richardson & Sons, Limited and Richardson Wealth Limited is a licensed user of the mark. Richardson Wealth Limited, Member Canadian Investor Protection Fund.