Later this week, Elon Musk’s SpaceX is expected to issue stock to investors in what is shaping up to be the biggest initial public offering ever. The company has said it will issue 555,555,555 shares at a price of $135, which would value it at about $1.75 trillion. Musk, who is already the world’s richest person thanks to his stake in Tesla, will own about forty-two per cent of SpaceX after the I.P.O., and he stands to become the world’s first trillionaire.

As its name indicates, SpaceX is a space company, and an impressive one at that. Since being founded, in 2002, it has fired hundreds of rockets, pioneered the development of reusable rocket components, and displaced Boeing as the biggest supplier of launches to the Pentagon and NASA. Last year, it carried out five missions to the International Space Station, and in January of this year it participated in the first-ever medical evacuation of an astronaut. SpaceX’s Starship rocket, which is currently under development, is intended to be fully reusable. Musk has said it will be used for missions to Mars, possibly including human landings by 2031.“We do not want humans to have the same fate of dinosaurs,” SpaceX says in its official I.P.O. prospectus, which combines its founder’s trademark grandiosity with financial details about its business.

There’s plenty of room for skepticism about the prospect of humans colonizing Mars. Yet nobody can doubt SpaceX’s engineering prowess or its founder’s ability to create pathbreaking businesses from scratch, even as he posts incendiary tweets around the clock. Despite his right-wing politics and his efforts to downsize the federal government when he was at DOGE, Musk has also proved adept at garnering taxpayer support for his businesses in the form of federal contracts and subsidies. According to an analysis by the Washington Post, these outlays have over the years amounted to thirty-eight billion dollars.

Since 2019, SpaceX has launched thousands of communications satellites into low orbit around the Earth, where they provide the backbone for its Starlink broadband service, which provides internet access to more than twelve million subscribers in one hundred and sixty-four countries. Primarily designed to connect people living in remote regions, Starlink has also proved to be a critical resource during the war in Ukraine, and in natural disasters from Malaysia to Texas. SpaceX’s space and connectivity arms now generate a lot of money: $15.5 billion in revenues last year. Although capital investments in Starship and other projects dragged the over-all company into a hefty net loss of nearly five billion dollars, it’s not difficult to see why SpaceX is potentially a very valuable business. Last week, Morningstar, a financial-research firm, estimated the fair value of the rocket launch and Starship divisions at $611 billion, a figure that would place SpaceX comfortably in the top twenty-five of all corporations globally. But it’s more than a trillion dollars short of SpaceX’s $1.75 trillion valuation target for the I.P.O. “We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO,” the Morningstar analysis said.

In SpaceX’s telling, the huge valuation gap will be made up by its new A.I. division. In February, it acquired another of Musk’s companies, xAI, the owner of X, the social-media platform formerly known as Twitter, and the developer of Grok, the A.I. chatbot that Musk has touted as a non-“woke” alternative to OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini. Despite Musk’s best efforts, however, Grok has yet to achieve the success of its rivals. Now operating as part of SpaceX, the xAI business brought in barely a fifth of the over-all company’s revenue during the first quarter of this year, and it had an operating loss of close to $2.5 billion. These forbidding financials didn’t put off Musk. Anthropic and OpenAI are both laying the groundwork for their own I.P.O.s; evidently, Musk saw a chance to go first. SpaceX is pitching itself to investors as an A.I. company, and it estimates the potential A.I. market at $26.5 trillion—the equivalent of more than eighty per cent of U.S. G.D.P.

In a world where A.I. mania was less advanced, you might have expected the I.P.O.’s underwriters—the banks hired to sell shares to investors—to have queried these numbers. We don’t live in that world. Theoretically, these banks, which are paid a percentage of every dollar raised, have a reputational stake in not overselling. But last week, Goldman Sachs, the lead underwriter, reportedly predicted that SpaceX’s A.I. revenues would rise more than a hundredfold over the next five years. Even Musk hasn’t gone that far.

Not all of SpaceX’s A.I. business is dependent on Grok. At a time when many A.I. companies are facing a shortage of computing capacity, it has built two massive data centers in Memphis, Tennessee. During recent weeks, the company has reached agreements with Anthropic and Google to rent out some of this capacity for payments that, combined, reportedly come to more than two billion dollars a month. But the development that has generated the most excitement among Musk’s large investor fan club is the idea of SpaceX operating data centers in space. “As part of this agreement, Anthropic also expressed interest in partnering to develop multiple gigawatts of orbital AI compute capacity,” SpaceX said in a statement announcing the deal with Anthropic.

The term “orbital-compute capacity” refers to the idea of stationing data centers in orbit and using solar energy to power them. “SpaceX is the only organization with the launch cadence, mass-to-orbit economics, and constellation operations experience to make orbital compute a near-term engineering program rather than a research concept,” the statement went on. Perhaps. In the prospectus, where I.P.O. candidates are legally obliged to acknowledge the risk factors attending their plans and ambitions, SpaceX admitted that setting up a fleet of data centers in space is “an incredibly difficult challenge,” which would require thousands of rocket launches each year to transport payloads weighing approximately a million metric tons in cumulative terms. Even if the orbital network could be successfully deployed, how would its components be maintained in such a hostile and remote environment? “No one else has previously operated or attempted to operate orbital AI compute, and the conditions of space on such AI infrastructure have not been tested,” the prospectus noted.

At this stage, the project looks more like a science experiment than a fully worked-out business plan. In Morningstar’s assessment of SpaceX, it said that utilizing solar power in space could theoretically give the firm a cost advantage over terrestrial operators of data centers, but added, “We are uncertain about the scientific and economic feasibility of such a plan.” Given these doubts, it placed a provisional value of $180 billion on SpaceX’s A.I. division, bringing its overall estimate of the company’s value to $780 billion, which is nearly a trillion dollars short of the I.P.O. target.

That’s a huge gap, and, purely in financial terms, the new stock looks like a risky proposition. The I.P.O. values SpaceX at more than ninety times its 2025 revenues. By comparison, when Google went public in 2004, it was valued at about ten times its trailing revenues; when Palantir, the data-analytics company, went public sixteen years later, the revenue multiple was about twenty. Musk is even outdoing himself. In June, 2010, when Tesla first issued shares, the company was valued at roughly fifteen times its prior-year revenues.

Since then, Tesla’s stock price has risen more than three-hundredfold, an ascent that explains Musk’s godlike status among investors who bought in early. Many of these folks will surely purchase stock in SpaceX, too. Most I.P.O.s are restricted to institutional investors, such as pension funds, but Musk has reserved thirty per cent of the shares for retail investors—a stipulation that some skeptics attribute to self-interest rather than any democratic urge. “The valuation is kind of crazy, and the only way to justify it is for SpaceX to become a retail cult stock,” Steve Eisman, a money manager who became famous for shorting subprime mortgage securities before the crash of 2007-8, remarked on his podcast. “So, this is an I.P.O. of a sci-fi story tailor-made for a sci-fi cult—to infinity and beyond, or, in this case, to Mars.”

In his classic book “A Random Walk Down Wall Street,” the economist Burton G. Malkiel noted that, traditionally, there have been two theories of stock valuation: the “firm foundation” theory, which relates stock prices to economic fundamentals, like profits and interest rates; and the “castles in the air” theory, in which investors concentrate on “psychic values.” As Tesla’s history demonstrates, Musk can create companies that eventually make hefty profits, but he’s also a master castle builder. Even as competitors have eaten into Tesla’s E.V. business during recent years, he has managed to keep its stock price up by insisting that it’s now an A.I. robotics company. Now he’s adopting a similar strategy with SpaceX. By this weekend, SpaceX is likely to be worth considerably more than Tesla, even though it generates less than a fifth of its revenues. Given all the hype around A.I., the enduring faith of the Musk fan club, and the fact that many index funds will be obliged to buy SpaceX as it enters the Nasdaq 100 index, the newly issued stock may well pop despite its stratospheric valuation. At some point, though, gravity will surely assert itself. And, if last week’s sell-off in tech stocks is a harbinger, that moment may not be very far away. ♦