Analysis: SpaceX is expected to complete the largest initial public offering in history, with investors forecast to value the company around US$1.8 trillion and the company potentially raising approximately US$75 billion of new capital. The public offering (IPO) provides investors with exposure to a business that has evolved far beyond its origins as a launch provider.
Today, SpaceX operates across launch services, satellite communications through Starlink and artificial intelligence infrastructure through xAI. While Starlink generates most current revenue and profitability, an increasing share of investment is being directed toward AI infrastructure. As a result, an increasing share of the company’s future growth expectations and valuation is becoming tied to artificial intelligence.
Key takeaways
SpaceX is no longer just a rocket company. It has evolved into a diversified infrastructure platform spanning launch, satellite communications and artificial intelligence. Starlink has become one of the world’s largest satellite internet networks, while xAI provides exposure to the rapidly growing AI infrastructure market.
Starlink is the economic and strategic engine. Starlink generates the majority of revenue, profitability and cash flow across the business. Its growing scale across consumer, enterprise and government markets provides the financial foundation that supports broader company investment.
AI infrastructure is becoming the primary investment focus. A growing proportion of capital expenditure is being directed toward GPUs, data centres and AI compute infrastructure through xAI. While AI currently contributes a relatively small share of revenue, it accounts for a significant proportion of investment spending and future growth expectations.
Valuation increasingly depends on xAI. Launch services and Starlink underpin today’s economics. However, much of the future valuation opportunity appears tied to successful execution within AI infrastructure and applications. At higher valuation levels, investors are increasingly underwriting the success of xAI and management’s ability to commercialise new opportunities beyond the company’s existing businesses.
Governance risk should not be overlooked. Elon Musk is expected to retain significant control following the IPO, giving minority shareholders limited influence over strategic decisions. As a result, future returns will depend not only on business execution but also on management’s capital allocation discipline and governance practices.
From launch provider to infrastructure platform
Founded in 2002, SpaceX originally focused on lowering the cost of access to space through reusable launch technology. Over time, the business expanded into satellite communications through Starlink, introducing recurring subscription revenue and significantly broadening its long-term addressable market. More recently, the formation and subsequent integration of xAI has further altered the investment case, positioning SpaceX as an infrastructure platform spanning launch capability, global connectivity and artificial intelligence.
Importantly, launch capability now increasingly appears to support the broader ecosystem rather than represent the primary economic driver itself. While launch remains strategically important, the company’s future growth opportunities increasingly sit within connectivity and AI infrastructure.
Starlink funds the AI opportunity
One of the most important takeaways from the IPO filing is the growing divergence between where SpaceX generates cash flow today and where it is investing for future growth. Historically, launch services formed the core of the investment case. Today, connectivity infrastructure generates the majority of revenue, profitability and free cash flow, while AI infrastructure dominates both strategic narrative and capital allocation.
While much of the recent investor attention has focused on xAI, Starlink remains the foundation of the broader investment case. The business has grown into the company’s largest source of revenue, profitability and cash flow, providing the financial resources that support investment across launch infrastructure and artificial intelligence. With more than 10 million subscribers across 164 countries and territories, Starlink has become one of the largest satellite communications networks globally.
The contrast between current profitability and investment spending is becoming increasingly pronounced. AI-related capital expenditure now materially exceeds combined spending across launch and Starlink infrastructure, highlighting the company’s increasing focus on AI infrastructure.
The result is a business model that increasingly resembles a hyperscale infrastructure platform, where mature connectivity assets generate cash flow that is reinvested into long-duration growth opportunities. In this case, Starlink appears to be funding one of the largest AI infrastructure buildouts in the world.
AI infrastructure: The next growth opportunity
Artificial intelligence is rapidly becoming one of the largest technology markets globally. In the IPO filing, management estimated an addressable market of approximately US$26.5 trillion across AI infrastructure, consumer subscriptions, digital advertising and enterprise applications, substantially larger than its estimated opportunities in launch services and connectivity. While such estimates should be viewed as illustrative rather than predictive, they help explain why a growing proportion of investment spending is being directed toward AI infrastructure.
Unlike many AI companies that focus primarily on developing models, SpaceX increasingly appears focused on building the infrastructure that supports the broader AI ecosystem. Following the integration of xAI, the company has invested aggressively into GPU clusters, data centres and inference capacity, positioning itself as both an AI developer and infrastructure provider.
Colossus highlights the scale of ambition. The rapidly expanding AI supercomputer reached approximately 200,000 GPUs within a remarkably short timeframe, demonstrating an ability to deploy infrastructure at a pace few competitors have matched.
The Anthropic compute agreement provides an important proof point for this strategy. Rather than competing directly with Grok, Anthropic is paying for access to SpaceX’s infrastructure, demonstrating that third parties are willing to utilise the company’s GPU clusters and compute resources. The arrangement highlights the strength of demand for AI compute capacity and suggests infrastructure assets may monetise more rapidly than many investors initially expected.
Importantly, the investment case for AI infrastructure differs from the investment case for AI models. While demand for compute capacity appears robust, competitive positions within frontier AI models remain less certain. Unlike launch and communications infrastructure, where SpaceX possesses clear cost and scale advantages, the long-term competitive positioning of Grok and other AI applications remains less proven.
As a result, we believe the infrastructure layer currently represents the more important component of the broader AI investment thesis.
Governance and shareholder structure
SpaceX’s governance structure provides Elon Musk with effective control through supervoting shares and limited minority shareholder influence. As a result, investors are backing not only the company’s operations but also Musk’s long-term capital allocation decisions across launch, communications and AI infrastructure.
The structure introduces governance risks including related-party transactions, concentrated control and limited shareholder oversight. At the same time, many investors view Musk as one of the company’s key strategic assets given his role in scaling reusable launch technology, Starlink and broader ecosystem development.
As a result, governance is likely to remain both a key attraction and a major risk factor within the broader investment case.
Risks
SpaceX remains exposed to substantial execution and valuation risk.
Execution risk. SpaceX is simultaneously scaling Starlink, developing Starship and investing heavily in AI infrastructure. Delays or execution challenges across any of these areas could materially impact long-term growth expectations.
Valuation risk. The IPO valuation already embeds substantial future success across Starlink, AI infrastructure and broader communications markets. Future returns will depend on the company’s ability to deliver against these expectations.
Valuation
Given the diversity of SpaceX’s operations, we believe a sum-of-the-parts framework provides the most appropriate valuation approach. Traditional aerospace valuation methodologies appear increasingly insufficient given the company now spans launch infrastructure, global connectivity, AI infrastructure and AI applications.
Importantly, even under relatively optimistic assumptions, launch infrastructure likely represents only a modest proportion of the broader implied valuation. Instead, much of the valuation is driven by Starlink and xAI, reflecting their larger addressable markets and stronger long-term growth potential.
Our valuation framework reflects the different characteristics of each business segment. Starlink is valued as a high-growth communications infrastructure platform, while xAI is valued using a blend of AI infrastructure and software-oriented frameworks.
Illustrative sum-of-the-parts valuation framework
The Anthropic agreement provides an important proof point for demand for xAI’s infrastructure assets, while the rapid deployment of Colossus highlights management’s ability to build AI infrastructure at scale. These developments support the premium valuation framework applied to xAI relative to traditional infrastructure businesses.
Given the limited financial disclosure available and the early-stage nature of several of the company’s businesses, the framework should be viewed as illustrative rather than a formal valuation. The purpose of the analysis is to demonstrate how investors may justify the range of valuation outcomes currently being discussed in the market and the level of revenue growth, business scaling and execution required to support those outcomes.
While launch capability remains strategically important, much of the implied valuation is driven by Starlink and xAI.
Current valuation expectations already embed substantial future growth across both businesses. Consequently, future shareholder returns will depend not only on continued business growth, but also on management’s ability to successfully monetise AI infrastructure investments and generate attractive returns on capital.
SpaceX remains one of the most strategically important companies globally. However, the investment case has changed materially. Starlink now provides the economic foundation of the business, while xAI increasingly drives future growth expectations.
This article is general in nature and is not financial advice. It does not take into account your financial situation, objectives, goals, or risk tolerance. All investments involve risk and can go down as well as up. Before making any investment decisions Craigs Investment Partners recommends you contact an investment adviser. Craigs Investment Partners Limited is a NZX Participant firm. To talk to one of Craigs ’ financial advisers, please call 0800 272 442. The Craigs Investment Partners Limited Financial Advice Provider Disclosure Statement can be viewed at craigsip.com/tcs. Visit craigsip.com.
