When 'Must-Own' Stories Become Dangerous Investments

Editor's note: Investors are once again throwing caution aside in the race to own anything tied to AI. But according to our colleague Whitney Tilson, anyone chasing these two upcoming IPOs is walking into the next great speculative collapse. In this piece, adapted from a recent article in Whitney Tilson's Daily, he explains why the SpaceX IPO is fueled by hype, not fundamentals...

Two of the biggest IPOs in history are coming. And they're competing for the title of most overhyped, overvalued large-cap stock of all time...

Elon Musk's rocket/satellite/AI company SpaceX (SPCX) will take the lead in this shameful race because it's going public first. It's expected to start trading this Friday, June 12... at an estimated 100 times revenues – despite weak 15% top-line growth last quarter and large, accelerating losses.

The "challenger" is ChatGPT developer OpenAI – the greatest cash-burning furnace ever...

OpenAI lost $8 billion in 2025. And it expects to burn $218 billion between 2026 and 2029. That's 23 times what Tesla (TSLA) lost from 2007 to 2018.

It would be one thing if OpenAI was on track to dominate AI. But Alphabet's Gemini, Anthropic's Claude, and cheaper Chinese large language models are surpassing it.

Yet OpenAI will be looking for a valuation north of $1 trillion.

Since OpenAI's financials aren't public yet, let's focus on the first participant in this race for the most overhyped, overvalued large-cap stock of all time...

The Market Is Rewarding Hype Over Fundamentals

On May 20, SpaceX submitted the paperwork to go public. It started with 14 pages of rocket and space photos – which makes sense if your goal is to distract investors from noticing the ugly financials.

The full-year income statement shows that SpaceX was profitable (albeit barely) in 2024, then swung to a big loss in 2025.

Things got much worse in the first quarter of 2026. Revenue growth slowed from 33% to just 15%. And net losses ballooned to $4.3 billion in just three months.

SpaceX has three businesses: launching rockets (for itself and others)... xAI, which includes its Grok AI chatbot and social network X (formerly known as Twitter)... and finally, the company's gem, global satellite Internet constellation Starlink.

Starlink subscribers more than doubled year over year in the first quarter. This business is highly profitable. And I'll say this much – I've seen firsthand that Starlink is a pillar of Ukraine's defense infrastructure.

The space-launch business is also unparalleled. While it lost money in the first quarter, it accounts for more than 50% of all worldwide orbital launches and more than 80% of all mass sent into orbit.

But xAI is dragging down these two great businesses...

It's burning huge amounts of cash in an attempt to keep up with its much larger AI competitors – not just Alphabet (GOOGL), but also Meta Platforms (META), Amazon (AMZN), Microsoft (MSFT), and others.

What's this odd mix of businesses worth? Maybe 5 times revenues? If we assume 15% growth for the entire year, that would be $21.5 billion of revenue. That translates into a $108 billion valuation.

But since investors love anything AI-related these days, let's be generous and say it's worth 10 times revenues. That would be a $215 billion valuation.

Any way you cut it, it's a tiny fraction of SpaceX's targeted $1.75 trillion market cap.

That's ridiculous.

My friend and New York University marketing professor Scott Galloway agrees. In his Prof G Media newsletter, he wrote...

How are SpaceX's bankers explaining the target $1.75 trillion valuation? By telling investors that the company's total addressable market is the size of the entire U.S. economy – $28 trillion. That target market includes an estimated $22.7 trillion in revenue from enterprise applications. That is 30x larger than the entire existing enterprise software market.

It also assumes that every single household in the world will start using Starlink for WiFi.

The implied growth is so ambitious that SpaceX is targeting a valuation higher than Meta, Broadcom, and Berkshire Hathaway – while having lower revenues than Macy's.

And don't even get me started on the absurd corporate governance (or lack thereof).

Musk and other insiders will hold the shares with the strongest voting rights, issuing minuscule voting rights to regular investors. After the IPO, he'll control more than 80% of SpaceX's voting power.

As Bloomberg columnist Matt Levine wrote...

The upshot is that SpaceX shareholders can't sue for breaches of fiduciary duty, and they can only barely sue for securities fraud...

If you are buying SpaceX stock to tell Elon Musk what to do, you should stop. If you are buying SpaceX stock because you want exposure to the space/AI business but you have your doubts about current management, you should stop. If you are buying SpaceX stock because you like Elon Musk and want to go along for the ride with him, yes, that's correct, that's the investment thesis here.

I expect both SpaceX and OpenAI to crater from their opening-day closing prices within a year or two.

But no matter who "wins" the title of most overhyped, overvalued large-cap stock of all time, both these IPOs are a disaster. And not just for the speculators who are eager to buy...

SpaceX and OpenAI may dominate headlines. But history shows that when investors start paying fantasy valuations for "must-own" stories, the fallout rarely stays contained to one company.

Best regards,

Whitney Tilson

Editor's note: In less than a month, you may own SpaceX shares... whether or not you invest in its IPO. That's because a new financial rule could "fast track" these shares into your portfolio. On June 16, Whitney will sit down with his most trusted research partners to explain why Big Tech and Wall Street could soon "force" other stocks into your portfolio, too... and to share the one move you should make before SpaceX goes public.