The three hard-tech moonshots fueling Space X's unbelievable IPO | Tech Crunch

Overview

Space X is coming to market on Friday, and investors can barely contain their excitement. The

There are lots of reasons to be skeptical of the investment — big IPOs tend to sink, the company is losing money, and Musk’s erratic online behavior would be terrifying coming from any other tech CEO — but it doesn’t seem to be slowing anyone down. Tech investors have learned to never bet against Elon, whatever the business logic indicates.

Details

But a dispassionate look at Space X’s financial plans can still tell us a lot about what they’re betting on: A business centered around orbital data centers that emerged in the last eighteen months as Musk sought a vision that would unite his conglomerate ahead of its IPO.

In true Musk style, it’s a bold scheme, and one that requires at least three near-impossible feats of engineering: a reusable rocket, a brand-new American chip foundry, and a sprint to build satellites faster than ever before.

That kind of business plan can be difficult to score. This week, two analyses tried to offer a more a sober assessment of Space X’s plan — one from Morningstar, the financial research firm, and another from Aswath Damodaran, a New York University finance professor who takes a special interest in corporate valuation. Both exercises find Space X significantly less valuable than the nearly

The significant difference is, in many ways, the result of bolting a world-beating space monopoly to a far riskier AI business. Morningstar’s analyst characterizes the difference between their assessment of a fair value of

In both analyses, the high-margins of the company’s space launch business and its satellite internet network are the most attractive things about the company, while its AI business is the most uncertain.

Part of the question is, what is Space X’s AI business? In the company’s S-1 market analysis, it frames its largest opportunity in enterprise AI — that its models will power coding tools built by the team it acqui-hired from Cursor, or the company’s Macrohard project, which is intended to equip digital agents with the capabilities to perform white-collar labor. Space X assessed the total market for that business as

But that contradicts the company’s recent deals to sell significant amounts of compute to Anthropic and Google, ostensible competitors in the model business. That’s not out of place for a Musk company; Space X frequently launches satellites operated by competitors to its Starlink network. It just usually does that from a place of strength, not while playing catch-up.

Acting like a neocloud might be good near-term business, but it raises the question of where value will accrue in the AI tech stack: Is it better to be a compute provider or a model-builder, if you can’t be both?

The scaling logic that dominates the AI business demands that serious frontier labs constantly train new and more powerful models (or, as Musk admitted in his recent lawsuit against Sam Altman, by distilling capabilities from other companies models). Any competitor not rushing ahead is likely to fall behind, although the rising abilities of cheaper open-source models might undermine that dynamic.

Space data centers are one way to square the circle, providing so much compute that Space X could effectively do both.

In a video interview released by Space X this week, Musk laid out the logic for why Space X is best positioned to deliver on data centers. The core of the argument was that Space X is the only company capable of putting a lot of mass on orbit cheaply, building a lot of solar panels, and building a lot of chips. In general, industry experts see space data centers at scale being about a decade away, but Musk argued (with a lot of caveats) that they are much closer.

“This is not a promise of what we’ll do,” Musk said in the video. “This is what we are going to try to do, and think we probably can do, which is to get to roughly an annualized rate of a gigawatt per year by the end of next year, in terms of space AI compute.”

Based on his expected maximum power delivery of 150k W per satellite, that’s a production rate of 6,666 satellites a year, or about 556 a month. That’s roughly twice the reported current production rate of Starlink satellites, which is just 70 a week. Though Musk says that the AI satellites are simpler in architecture, that’s a lot to ask for a production facility that hasn’t been built yet. The company is also still building out its solar panel production facility.

That’s before we get to Terafab, the company’s much-discussed chip foundry, which Musk sees feeding into the later stages of this product as the company tries to scale up to a terawatt of annual compute production. Chip fabs are some of the hardest modern industrial projects, typically costing billions of dollars and taking as long as a decade to build.

Then there’s the most vital question: What about Starship, the key to Space X’s ability to economically put all those chips in orbit?

A recent test flight went well enough, but it didn’t suggest that rapid reusability is right around the corner. Space X may end up reusing just the booster at first, which would raise the costs of the space data center roll-out. For now, the company is still undergoing a mishap investigation for the FAA to understand why the booster stage failed to make a controlled reentry as planned. Space X hasn’t responded to questions about when the vehicle will fly again, thought it has said it expects to begin launching Starlink satellites with it by the end of this year.

But take that with a grain of salt: Consider that NASA, which has a nearly $4 billion contract with Space X to use Starship as a Moon lander, still isn’t ready to commit to a test mission with the vehicle scheduled for late 2027.

As public investors get their hands on Space X shares, they’ll find themselves owning a near-monopoly on access to space in the US and Europe, a world-spanning communications network, and a wager on the most ambitious infrastructure project of the AI era.

Those projects depend on Space X creating something never seen before — a fully-reusable rocket. The company will also need to build a high-rate production facility for AI satellites, but do so in eighteen months, not the decade it took to develop its Starlink manufacturing. Finally, it will need to build a chip foundry in the US, something even dedicated silicon firms are reluctant to take on. Musk is right that Space X is the only company positioned to build any of this anytime soon, but that speaks to the magnitude of the challenge as much as the company’s likelihood of achieving it.

Musk used to say he wouldn’t take Space X public until he reached Mars, since fickle investors might lose faith along the way. Those plans may have been put on hold, but what he’s laid out ahead of the company’s IPO could be just as difficult.

Key Takeaways

• Space X is coming to market on Friday, and investors can barely contain their excitement
• There are lots of reasons to be skeptical of the investment — big IPOs tend to sink, the company is losing money, and Musk’s erratic online behavior would be terrifying coming from any other tech CEO — but it doesn’t seem to be slowing anyone down
• But a dispassionate look at Space X’s financial plans can still tell us a lot about what they’re betting on: A business centered around orbital data centers that emerged in the last eighteen months as Musk sought a vision that would unite his conglomerate ahead of its IPO
• In true Musk style, it’s a bold scheme, and one that requires at least three near-impossible feats of engineering: a reusable rocket, a brand-new American chip foundry, and a sprint to build satellites faster than ever before
• That kind of business plan can be difficult to score