For me, I worry about retail investors who may buy into the narrative without due care about all the uncertainty hanging over the companies. I apply a further discount vs. you to account for u this Bhide/Knightian uncertainty.
The xAI purchase seemed slightly bizarre to me. Hopefully won't be a Solar City part 2, but the possible conflicts of interest are not constrained due to the governance structure. That's a risk. Musk is a driver of ideas, but is a maverick.
The broader point is more conceptual and I think adds substantial uncertainty. There are real regulatory/taxation/foreign relations risks that are hard to quantify.
I sometimes think about what Georgism would look like now. A neo georgism. Well, I think SpaceX is perhaps the company that is aiming to exploit the commons at a time when norms are only just being established. Why do I think this?
Orbital slot mechanics. He typically doesn't pay. This is literally a commons. Rather, the company usually pays for spectrum only. near earth norms are likely to evolve, especially as China asserts itself. That introduces policy change risk, contract risks etc. i think this not baked into rosy assumptions.
xAI and other LLMs do, to an extent, build upon the collective knowledge and information of humanity. That is a commons of sorts too and one might reasonably assume its use may at some point be taxed. There may be lawsuits. These are uncertainties that matter. Some of the mistakes I've seen fund managers make is ignore such knightian risks.
Geopolitical risks.
Antitrust
Insufficient information in the prospectuses and very optimistic to news.
There are many potential positives too, however. Aswarth does a great job explaining these. Here too I have some worries. The move from assymetric information to what I call sovereign information (created by an entity) through investment in infrastructure changes the game. This too is an under explored area of economics. It too may be regulated.
So, will the company generate supernormal profits? There are some structural reasons to think yes. There are governance issues. There are lots of uncertainty overhangs. Limited info. A rosey implied target valuation. For me, I think this is a short term trade idea for momentum minded folks. And a potential buy if it comes down.
Of course, options markets are so powerful now and this will be anither Tesla like beast. That'll be where to watch, and all the volatility of volatility trades around launches etc....
Finally, I've been eyeing how different investors have been marking this. I do not think they had sufficient time to really do the valuations properly after the, in my view, silly merger. I see evidence of strange arb trades too between vehicles.
Anyway, interesting times. Musk is never boring, as you say.
Professor Damodaran, fascinating framework. When analyzing SpaceX through a pure fundamental lens, the friction isn't just the lack of public financials, but the sheer magnitude of Capex required to sustain the Starship and Starlink programs.
From a quality investing standpoint, SpaceX possesses an almost absolute monopolistic moat in heavy launch capabilities. However, traditional Free Cash Flow (FCF) analysis breaks down here because separating maintenance Capex from growth Capex is practically impossible in a frontier industry. The entire valuation rests on the terminal value and the assumption that Starlink's recurring revenue will eventually subsidize the interplanetary R&D. It will be a definitive test of whether the market will pay a massive premium today for an unassailable moat, deferring the actual cash flow yield entirely to the next decade.
For the space launch business and peer group, you can use Rocket Lab as a reference perhaps. Rocket Lab is a listed company with SEC filings at link below.
For those not minded to do so, I pose two questions:
(1) How much of the valuation of SpaceX (or Tesla for that matter) is hot air caused by hype from Musk, which translates to momentum from those that buy in to the narrative, which translates into FOMO, then more hype and momentum to keep the flywheel spinning?
(2) How much of the valuation attaches to Elon Musk? He has a cult following. His disciples believe he can do no wrong. They believe he has the Midas touch. When a cults charismatic founder disappears, so too does the cult. In other words, if Musk were to have a heart attack and die tomorrow, would Tesla and SpaceX still command their current premium, or is this just a love affair that the market has with Elon?
Both of these questions need to be addressed because intelligent investing is about risk adjusted returns, yet too little thought is given to the downside risk being assumed in such lofty valuations.
Fully agree with the framing. What I keep coming back to: what's the rationale for a non-institutional investor to take on the additional complexity of guessing whether the market has priced the IPO fairly? I don't think day-one pop is a reliable bet here. The asymmetry seems obvious — wait, get better information, probably get a better price.
The segment-level build is the right approach. Treating launch, Starlink, and Starshield as a conglomerate with different growth rates and margins forces you to be honest about which part of the story is actually doing the valuation work.
Fascinating valuation exercise. The asymmetry here is real — how are you thinking about Starlink's revenue predictability as the biggest driver of terminal value?
Very curious that you consider a 20x in revenue in a decade and them "only" capturing 70% of a much larger launch market to be conservative assumptions.
Warren Buffett 1998- "If I was teaching a class at business school, on the final exam I would pass out the information on an Internet company and ask each student to value it. Anybody that gave me an answer, I'd flunk." "I don't know how to do it. But people do it all the time; it is more exciting. If you look at it like you are going to the races — that is a different thing — but if you are investing… Investing is putting out money to be sure of getting more back later at an appropriate rate. And to do that you have to understand what you are doing at any time. You have to understand the business."
You mention that 2026 projected revenue from space launches to be approx. 30 billion. However, you also state Starlink accounts for 2/3 of Spacex revenue totaling 15 billion for 2025. Both those statements can’t be true. What am I missing?
Another excellent post. Thank you.
For me, I worry about retail investors who may buy into the narrative without due care about all the uncertainty hanging over the companies. I apply a further discount vs. you to account for u this Bhide/Knightian uncertainty.
The xAI purchase seemed slightly bizarre to me. Hopefully won't be a Solar City part 2, but the possible conflicts of interest are not constrained due to the governance structure. That's a risk. Musk is a driver of ideas, but is a maverick.
The broader point is more conceptual and I think adds substantial uncertainty. There are real regulatory/taxation/foreign relations risks that are hard to quantify.
I sometimes think about what Georgism would look like now. A neo georgism. Well, I think SpaceX is perhaps the company that is aiming to exploit the commons at a time when norms are only just being established. Why do I think this?
Orbital slot mechanics. He typically doesn't pay. This is literally a commons. Rather, the company usually pays for spectrum only. near earth norms are likely to evolve, especially as China asserts itself. That introduces policy change risk, contract risks etc. i think this not baked into rosy assumptions.
xAI and other LLMs do, to an extent, build upon the collective knowledge and information of humanity. That is a commons of sorts too and one might reasonably assume its use may at some point be taxed. There may be lawsuits. These are uncertainties that matter. Some of the mistakes I've seen fund managers make is ignore such knightian risks.
Geopolitical risks.
Antitrust
Insufficient information in the prospectuses and very optimistic to news.
There are many potential positives too, however. Aswarth does a great job explaining these. Here too I have some worries. The move from assymetric information to what I call sovereign information (created by an entity) through investment in infrastructure changes the game. This too is an under explored area of economics. It too may be regulated.
So, will the company generate supernormal profits? There are some structural reasons to think yes. There are governance issues. There are lots of uncertainty overhangs. Limited info. A rosey implied target valuation. For me, I think this is a short term trade idea for momentum minded folks. And a potential buy if it comes down.
Of course, options markets are so powerful now and this will be anither Tesla like beast. That'll be where to watch, and all the volatility of volatility trades around launches etc....
Finally, I've been eyeing how different investors have been marking this. I do not think they had sufficient time to really do the valuations properly after the, in my view, silly merger. I see evidence of strange arb trades too between vehicles.
Anyway, interesting times. Musk is never boring, as you say.
Professor Damodaran, fascinating framework. When analyzing SpaceX through a pure fundamental lens, the friction isn't just the lack of public financials, but the sheer magnitude of Capex required to sustain the Starship and Starlink programs.
From a quality investing standpoint, SpaceX possesses an almost absolute monopolistic moat in heavy launch capabilities. However, traditional Free Cash Flow (FCF) analysis breaks down here because separating maintenance Capex from growth Capex is practically impossible in a frontier industry. The entire valuation rests on the terminal value and the assumption that Starlink's recurring revenue will eventually subsidize the interplanetary R&D. It will be a definitive test of whether the market will pay a massive premium today for an unassailable moat, deferring the actual cash flow yield entirely to the next decade.
Another great one, thank you! Appreciate it!
Thank you for sharing.
For the space launch business and peer group, you can use Rocket Lab as a reference perhaps. Rocket Lab is a listed company with SEC filings at link below.
https://investors.rocketlabcorp.com/financial-information/sec-filings?field_nir_sec_cik_target_id=&field_nir_sec_date_filed_value=&items_per_page_toggle=0&&&&page=0
My thoughts on SpaceX and its valuation align with yours Professor Damodaran.
I articulate my thoughts in a short Substack note for anyone interested in reading them: https://substack.com/@rockandturner/note/c-248006772?r=1owuoe&utm_source=notes-share-action&utm_medium=web
For those not minded to do so, I pose two questions:
(1) How much of the valuation of SpaceX (or Tesla for that matter) is hot air caused by hype from Musk, which translates to momentum from those that buy in to the narrative, which translates into FOMO, then more hype and momentum to keep the flywheel spinning?
(2) How much of the valuation attaches to Elon Musk? He has a cult following. His disciples believe he can do no wrong. They believe he has the Midas touch. When a cults charismatic founder disappears, so too does the cult. In other words, if Musk were to have a heart attack and die tomorrow, would Tesla and SpaceX still command their current premium, or is this just a love affair that the market has with Elon?
Both of these questions need to be addressed because intelligent investing is about risk adjusted returns, yet too little thought is given to the downside risk being assumed in such lofty valuations.
Wonderful , thanks so much for this Aswath
Fully agree with the framing. What I keep coming back to: what's the rationale for a non-institutional investor to take on the additional complexity of guessing whether the market has priced the IPO fairly? I don't think day-one pop is a reliable bet here. The asymmetry seems obvious — wait, get better information, probably get a better price.
That works while the growth story can carry the gap to profitability.
Hardware doesn’t break the demand—it breaks the timeline.
And timelines are usually what decide who actually captures the upside.
Thank you for the article...
The segment-level build is the right approach. Treating launch, Starlink, and Starshield as a conglomerate with different growth rates and margins forces you to be honest about which part of the story is actually doing the valuation work.
Fascinating valuation exercise. The asymmetry here is real — how are you thinking about Starlink's revenue predictability as the biggest driver of terminal value?
Very curious that you consider a 20x in revenue in a decade and them "only" capturing 70% of a much larger launch market to be conservative assumptions.
It's a vibe valuation for the times though.
Warren Buffett 1998- "If I was teaching a class at business school, on the final exam I would pass out the information on an Internet company and ask each student to value it. Anybody that gave me an answer, I'd flunk." "I don't know how to do it. But people do it all the time; it is more exciting. If you look at it like you are going to the races — that is a different thing — but if you are investing… Investing is putting out money to be sure of getting more back later at an appropriate rate. And to do that you have to understand what you are doing at any time. You have to understand the business."
You mention that 2026 projected revenue from space launches to be approx. 30 billion. However, you also state Starlink accounts for 2/3 of Spacex revenue totaling 15 billion for 2025. Both those statements can’t be true. What am I missing?
8% cost of capital for a DCF with that amount of growth forecasted ?!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!