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SpaceX made its public market debut last Friday in the largest IPO in history, surging 19% on its first day and another 19% on the second trading day. The company’s market capitalization quickly surpassed $2.5 trillion, vaulting it into the ranks of the world’s largest technology companies. After the underwriters exercised their overallotment option, the total offering size reached $85.7 billion, setting a new record.
In the face of such a red-hot market reception, an enticing comparison naturally emerges: will SpaceX unleash a super-rally reminiscent of Nvidia‘s? Over the past five years, Nvidia’s stock has soared more than 1,000%, transforming from a graphics chip company into the “computing power oil” of the AI era. But a closer examination reveals that the stories of these two companies are far less similar than they appear on the surface.
The chasm in revenue and profit
Nvidia’s success is built on a solid fundamental foundation – annual revenue exceeding $215 billion and net profit of $120 billion. By contrast, SpaceX generated total revenue of $18 billion last year, of which Starlink contributed $11.4 billion. However, the company’s capital expenditures in the AI sector amounted to $12 billion, resulting in a full-year net loss of $4.9 billion.
This is not the financial profile of a profitable company. The IPO euphoria masks the fact that SpaceX remains deep in a massive investment phase, still a considerable distance from sustained profitability. Before its stock took off, Nvidia had already proven its business model’s viability through years of consecutive earnings beats. Meanwhile, the core pillars of SpaceX’s business model – space-based data centers, Mars transportation, and interplanetary internet – remain at the vision stage.
Starlink is an engine, but not enough to drive the entire ship
Starlink is undeniably SpaceX’s most mature business today. Its subscriber base grew from 2.3 million in 2023 to over 10 million as of March this year, generating annual revenue of $11.4 billion and demonstrating strong growth momentum. Yet even if Starlink continues its rapid expansion, its scale is far from sufficient to support the future expectations implied by a $2.5 trillion market capitalization.
What truly excites investors about SpaceX are the possibilities that have yet to be commercialized: AI data centers in space, a global monopoly on low-orbit satellite internet, and the Mars colonization that Musk has long championed. These narratives fuel immense speculative imagination, but they come with an equally high degree of uncertainty.
Diverging investment logics
Nvidia is a profit-generating machine already in full operation, whereas SpaceX resembles a “long-dated option” – one with a hefty premium and an unknown exercise date. Investors who are bullish on SpaceX are essentially betting that Musk can deliver on his epoch-spanning vision. Conservative investors, on the other hand, would point out that any technological setback, launch failure, or earnings miss could trigger a sharp correction.
In the short term, the market enthusiasm and retail investor frenzy sparked by the IPO may drive SpaceX shares higher, which bears a superficial resemblance to Nvidia’s rally in its early days. But over the long term, the investment theses for the two companies are fundamentally different: Nvidia’s ascent is driven by sustained earnings surprises, while SpaceX’s valuation relies more heavily on narrative and faith.
Conclusion
Can SpaceX replicate the kind of trillion-dollar market run that Nvidia has achieved? In the coming weeks or even months, market sentiment could push the stock even higher. But for rational investors, it is essential to recognize that Nvidia took two decades of profitable track record to validate itself, while SpaceX’s story has only just begun. Amid the excitement and frenzy, maintaining a prudent regard for fundamentals is perhaps the most fitting posture for navigating this cosmic-scale IPO.
