Is SpaceX Rocket Fuelled ?

There is no lack of ambition by Elon Musk, the creator of this unusual company. He states its mission is "to build the systems and technologies to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars. To do this we have formed the most ambitious, vertically integrated innovation engine on (and off) Earth." Will it make investors’ money?

This week sees the launch of the Space X shares, surrounded by plenty of hype. The quantum of shares to be issued is relatively small compared to the very ambitious wish to value the whole at upwards of $1.7tn. The free float of available shares will be around 4% of the total, with a putative value of $75bn.

The company is spending plenty of money on expanding its data centres and AI business alongside its social media X service. It is putting communications centres into space to help expand world capacity for data and communications. It has developed a rocket to send people and cargo into space and is planning a larger and more powerful one. These are all businesses with plenty of scope for expansion. They are also businesses that need to grow quickly to evidence profitable potential.

The Group is loss making and in need of large amounts of cash to press ahead with its expensive capital projects, especially in AI. It is assumed that the Elon Musk chutzpah will overcome obstacles to profitability. He will ensure he retains control of the company through a complex two-tier share structure. He is the dominant owner of Class B shares which have ten times the votes of the ordinary shares for sale. His flotation timing coincides with anticipation of fast growth from digital and linked space technology. His only profitable business in the Group is the satellite communications services. That is expanding customer numbers, but as it does so revenue per head declines. This is not an investment for the faint hearted or for Musk sceptics: on any measure, the listing will be on a stretched valuation on the estimates released so far.

Space X will go into the Nasdaq share index just 15 days after the IPO, and into the FTSE and MSCI indices quickly as well. The S&P will make SpaceX wait for at least a year, as it does not meet its requirements of having a free float of shares more than 10% of the total and does not meet its requirements on profitability. The indices adopting Space X will include a market value related to the free float value, not the total implied value of the whole company. Nonetheless this means early buying of substantial amounts of shares by Index tracker funds to give the shares a boost in the early days after the issue.

AI and the digital sectors continue to dominate stock market performance. Nasdaq, the US technology-led market, has rallied well from the March/April lows, showing gains of 15% so far this year. This compares with just 4% for the EURO STOXX 50 and the UK FTSE 250. Japan has managed an impressive 28% based on further budget and monetary expansion. India has fallen on worries over service companies in an age of AI. Emerging markets have performed well, led by the TSMC driven Taiwanese Index up 50% and by South Korea, up by almost 90% in 2026 so far, with an exceptionally strong performance from Samsung. 

There have been plenty of worries expressed about the ability of companies to sustain their current rapid rates of capital investment without undermining high margins and profits growth. So far there has been good demand for the enhanced business and personal services available from applying AI solutions in social media and business programmes. The US giants get bigger, sustaining high share prices with big gains in turnover and profits. However, Broadcom serves as a timely reminder that with high valuations today any share will be punished if it does not meet elevated expectations of growth: the great growth displayed in its latest quarterly report still disappointed market expectations and led to a sharp setback not only in its own shares but in other competing companies too.

It is not just Space X being launched onto the market. Also awaiting Initial Public Offerings of shares are Anthropic (Claude AI), with around $1tn in possible value, and Open AI (Chat GPT), also around $1tn. There are three one trillion-dollar companies coming to market that will extend the dominance of the US market, increasing the proportion of US and digital in those world indices that include them.

Those thinking of buying should see two big differences between the existing tech giants and the newcomers. The newcomers are mainly loss making and need large sums of investment capital to scale up their operations to try to grow their revenues rapidly in line with ambitious forecasts. The existing tech giants are generating large revenues, profits and cashflows and have so far been able to sustain good growth rates. The new companies come supported by injections of capital and debt and enjoy very optimistic valuations given their low revenues. The existing tech companies are generating substantial cash and often buying back their own shares.

These new offerings will be fuelled by hope, glamour, and expectations of further global adoption of technologies at an even more rapid rate than seen to date.

About the author 

Lord Redwood has been a long-standing member of the EPIC Investment Partners Advisory Board. 

Lord Redwood is a well known commentator on governments and economies, with long experience of investment markets. Trained as an analyst at Robert Flemings, he moved to N.M. Rothschilds where he became a Manager and Director of pension and charitable funds and Head of Equity Research. He was seconded to become Head of the Downing Street Policy unit before chairing a large, quoted UK industrial business. He served as an MP and a government Minister.  

In 2007 he set up Pan Asset with a colleague, an investment management business that pioneered active/passive funds and models in the UK. Following the sale of the business to Charles Stanley, a quoted investment manager in the City, he became their Global Chief Strategist advising on non-UK markets and economies. He also ran a demonstration fund for the FT, writing articles about it and illustrating the use that can be made of ETFs in portfolios. 

He is now an adviser to EPIC, providing insights into the big investment issues of the day from the debt and spending problems of the major governments to the green and digital revolutions which have so much impact on equity markets. He is a Distinguished Fellow of All Souls College, Oxford, where he helps with their Endowment investments and gives occasional lectures on modern economics and politics.