SpaceX’s stock slide is raising a bigger question about AI-fuelled IPOs

The weakness in SpaceX shares this week has raised concerns about the broader momentum behind artificial intelligence-related IPOs, after the company’s stock fell sharply on Friday and its market value dropped by more than $1 trillion from its record high.

AI forms a central part of SpaceX’s IPO narrative as it pursues plans to deploy data centres in space, targeting what it estimates to be a total addressable market worth $26.5 trillion. The record-breaking public offering, billed as the largest in history, also gave a major boost to Wall Street’s leading investment banks, which generated their highest revenue from advising on equity offerings in the second quarter since 2021.

On Friday, SpaceX’s stock dropped as much as 6.9% in early US trading to $122.12 a share before recovering some of its losses. At that level, the company’s market value stood at $1.61 trillion, down from its high of $2.64 trillion seen at the close of June 16, according to a Bloomberg report. The stock is now trading below its IPO price of $135.

The decline followed the company’s decision to abort the launch of its Starship rocket because of an engine-related problem, with SpaceX saying another attempt would be made within the next few days.

Earlier this month, SpaceX was added to the Nasdaq-100 Index and received a series of bullish analyst ratings, with the stock currently carrying an average 12-month price target of $235.34 — a sign that, despite the slide, Wall Street analysts remain broadly positive on the company’s prospects.

SpaceX’s founder Elon Musk became the world’s first trillionaire on the strength of the company. His long history of publicly confronting short sellers continues to make bearish bets on the stock a high-risk strategy.

Wikimedia Commons/by Steve Jurvetson