Rational Reaction: SpaceX
The Opportunity
1. Starlink is a monopoly in disguise.
This is the core of the bull case. Starlink is the only global broadband infrastructure that works everywhere on Earth simultaneously, including oceans, remote areas, disaster zones, and conflict regions.
Their satellite network is almost 10 times bigger than anyone else in the world. Government and military contracts (including U.S. DoD) provide a revenue floor that is essentially recession-proof.
2. The launch business is another monopoly.
SpaceX has already launched its Falcon 9 rockets more than 160 times in 2025.
One specific Falcon booster has launched and landed 32 times, with turnaround times between flights as short as three weeks. Because traditional rockets are single-use, the reusable nature of SpaceX creates a cost structure no one else can match right now.
3. xAI infrastructure.
Space-based data centers powered by solar energy with 0 land costs, 0 cooling costs, and 0 geographic constraints are a massive opportunity. The question is whether it can work.
4. Starship could change everything.
The space cargo business is what really makes SpaceX different than any other publicly available investment.
This could create entirely new industries that don't exist today such as space manufacturing, space-based solar power, asteroid mining, and the xAI orbital data centers I already mentioned.
Theoretically, Starship could make economically viable point-to-point Earth travel that takes less than an hour a reality.
The Issues
1. GAAP losses are enormous.
Despite the EBITDA growth, SpaceX posted a GAAP net loss of $4.94 billion for full-year 2025. The gap between EBITDA profit and the actual loss is driven by things like stock-based compensation, depreciation on the Starlink system, and AI infrastructure capex. All of those things are real cash costs, even if they're non-cash on the income statement in the short-term.
2. xAI is burning cash.
SpaceX's AI operations posted losses over $6 billion in 2025 and another $2.5 billion in Q1 2026 alone. AI R&D costs grew by over 300%, and the company has $25.45 billion in contracts... and 95% of those are all due in 2026 and 2027!
This is the key GAAP issue. See below on why GAAP matters for inclusion to the S&P 500.
3. Declining annual revenue per subscriber.
Starlink's average revenue per subscriber per month has fallen from $99 in 2023 to $66 in Q1 2026. The good news is they've had more subscribers, but the bad news is each is paying less. Even though competition is way behind, it should get priced in, but right now that amount is hard to calculate.
One more risk of note: If Starlink is heavily used by governments such as the US and Ukraine, then the Starlink system could very likely become a military target by enemies of those countries. That poses unknown risk to the entire structure of the network.
4. Governance is a MASSIVE red flag.
Musk holds 85.1% of the voting power through Class B shares (10 votes each vs. Class A's 1 vote). The IPO shares are Class A. The filing document even says, "Mr. Musk will have the power to control the outcome of matters requiring shareholder approval, including election of all our directors." Basically, shareholders have 0 power.
SpaceX used a Texas incorporation and other legal provisions to make shareholder litigation more difficult, including setting a 3% ownership threshold ($52.5 billion) to file derivative lawsuits. Basically, no one can file a lawsuit against them.
SpaceX carries 0 key-person life insurance on Musk AND he cannot be removed from his CEO and board roles without approval from Class B shareholders... but he controls the Class B shares. So, he can't be fired for any reason. His divided attention across Tesla, Neuralink, The Boring Company, his advisory role in government, etc. adds a ton of risk that SpaceX could be neglected.
5. The valuation is huge.
At $1.75 trillion valuation against $18.7 billion in 2025 revenue, SpaceX is asking investors to pay roughly 95x trailing revenue. Overall, there really isn't a direct comparable in public markets.
It's worth noting some big institutional players won't touch SpaceX. A Danish pension fund has actually blacklisted SpaceX over governance. Its CIO called the structure "catastrophic." He said he would reject SpaceX even at a more attractive valuation. If large institutions pass, retail investors could be left holding more risk than they thought they would.
The Indices
A lot of fuss has been made about how including SpaceX in the indices will be disruptive. A few points of clarity on that:
1. Indices are weighted based on the float-adjusted market cap. This does NOT include Musk's Class B shares and likely excludes any strategic shareholders like Alphabet.
Given that, the indices will have to absorb ~$75 billion, NOT $1.75 trillion.
2. Each index has its own rules for inclusion. For example:
The Nasdaq 100 and FTSE Russell indices are likely to adopt SpaceX fairly quickly.
Both modified their rules to create faster inclusion.
The S&P 500 may not add SpaceX for a while... and maybe not at all.
S&P has a policy against adding new companies with multiple share classes to the S&P 500. This rule was adopted in 2017 specifically in response to Snap's IPO. Companies already in the index (Alphabet, Meta, etc.) were grandfathered.
Also, the S&P 500 will only add companies that show a profitable GAAP in its most recent quarter and the sum of its most recent 4 quarters. As mentioned earlier, SpaceX's GAAP is a net loss of $4.94 billion in 2025.
3. The S&P Total Market index is available to SpaceX.
The rules for this index are more like FTSE Russell, so the pathway is easier given the very broad nature of the index.
The Bottom Line
Our view is that SpaceX could be an attractive long-term holding given its dominant competitive position across its core businesses. However, its significant governance risks and high-profile status may contribute to periods of pronounced and prolonged volatility. Investors should recognize that the company’s exceptionally high valuation, ambitious growth expectations, and exposure to unique space- and defense-related risks create challenges that few companies face. As a result, clients should be prepared for potentially substantial drawdowns and elevated volatility that may persist for extended periods.