It’s no surprise that SpaceX’s proposal statement, filed on the night of May 20th, shows that as of today, the rocket, satellite and AI business is generating only modest revenues and posting significant losses. The company’s market capitalization is expected to reach more than $1.5 trillion after its IPO, scheduled for mid-June, underscoring the overwhelming optimism the company’s fans are banking almost exclusively on great things to come. But a careful reading of S-1 reveals significant hurdles on the way to achieving the magical performance needed to reward shareholders who flocked to the most anticipated debut of all time.
The reason for this is not only that SpaceX will be fighting the law of large numbers by starting off as a publicly traded company with an extremely expensive stock. Simply put, as the prospectus highlights, Elon Musk’s creation essentially reinvented the company from a commercial pioneer facing relatively benign competition to an AI-centric player competing for the same funding and customers as the hyperscalers led by Microsoft, Google, OpenAI, Coreweave, and other smaller but still formidable participants.
To win in this crowded and hot field, SpaceX will need to make massive investments in data center capital and research and development to create new enterprise products. As the prospectus shows, the already huge spending is already accelerating and will continue to increase over the next few years. But reaping significant benefits from AI may take longer. S-1 also emphasizes this point. The original space business may be highly successful, but it likely won’t be large enough to do most of the work. It’s clear that Musk’s ambitions, and the hopes of investors reflected in his valuation, are heavily tilted toward a dominant performance in AI.
To hinder SpaceX’s prospects, it’s important to ignore the Wall Street noise and Musk’s hype about moon colonies and examine how much money SpaceX is currently pouring into forming its AI franchise through its prospectus, and how much profit it is making from the space ventures it supports.
An excellent new report by David Trainer, CEO of financial research firm New Constructs, reveals several weaknesses that threaten SpaceX’s prospects. These include a lopsided governance structure in which funds and individuals own almost 60% of the shares but have little voting rights. Instead, Elon Musk will exercise virtually complete control. The founder and CEO cannot be removed by shareholder vote and can be freely appointed to the insider-dominated board. (This reporter addressed these issues in a previous article https://fortune.com/2026/05/22/space-x-stock-ipo-price-elon-musk-shareholders/.) Trainor also notes that SpaceX will debut in public life as the most unprofitable company in all of its major businesses.
Another red flag: A trainer examines the S-1 and finds that a large portion of the expected IPO proceeds have already been spoken for. The question then arises: where will this money needed for capital investment come from? The potential for equity issuance and borrowing required to advance AI could be a big negative for investors.
Of the two non-AI fields, rockets are losing money, while satellites are thriving.
As the S-1 demonstrates, SpaceX stands on three key pillars: space, connectivity, and AI. Overall, the consolidated companies recorded revenue of $18.7 billion and an operating loss of $2.6 billion. AI is the biggest hurdle and highlights the challenges ahead. Space consists of a lineup of rockets that the company manufactures in-house and deploys to launch its own satellites. It also sells rockets to NASA, conducts launches as a contractor for NASA, and hosts special orbital trips for highly paid VIPs.
In contrast, the connectivity sector is a huge money-generating sector with an outstanding runway. This is SpaceX’s only profitable franchise, accounting for nearly two-thirds of its total sales. The Starlink segment operates a galaxy of 9,600 satellites, three-quarters of the total number of satellites in orbit. More than 10 million users pay for mobile and broadband service subscriptions. The business is well-protected, as the company is the world’s largest player in commercial satellites, providing a deep moat of massive investment and technological wizardry needed to counter its dominance. It is also about the stability of the pension format.
In the 12 months to Q1, Starlink doubled its subscriber numbers, reaching the 10 million mark. Disadvantage: Newly added customers are becoming less profitable. Subway’s per capita revenue, a key metric, fell from $99 in 2023 to $66 in the first quarter of this year. As a result, revenue growth has slowed, increasing 50% year over year to $11.4 billion in 2025. So far, the division has been very profitable, with operating profits of $4.4 billion last year and margins of 30%. Still, it faces intense price competition from terrestrial networks, from T-Mobile to Google Fiber, that users often find more reliable than satellite services. The most important issue: The connectivity subscription machine, even if it continues to grow rapidly, is not large enough to drive the revenue and profits SpaceX needs to reward shareholders.
A big concern for shareholders: IPO proceeds won’t cover much of the AI capital investment. So where do tens of billions of dollars a year come from?
Instead, that burden falls on AI. SpaceX has only recently reinvented itself as the hottest technology giant of the century. The change happened in February, when it merged with Musk’s xAI. The merger reportedly boosted SpaceX’s private valuation by $250 billion. AI also accounts for a large portion of the deficit. Over the past five quarters, AI generated $4 billion in revenue, but suffered an operating loss of $8.9 billion, more than double that.
As Trainor observes, despite Starlink’s success, SpaceX, as measured by both profitability and return on invested capital, overall ranks at the bottom of all its broadband, mobile, and AI peers due to losses from Space, and AI in particular. Its scores in these categories last year were -7% and -3%, respectively, far behind Comcast (12% and 6%), AT&T (17% and 4%), Amazon (11% and 14%), and even Coreweave (10% and 1%).
The company-wide profitability deficit could raise questions about whether the company can fund the huge capital investments needed to deliver on its promise to make the AI side the biggest winners.
SpaceX is rapidly expanding its portfolio of newly acquired data centers from xAI. Its flagship facilities are the aptly named Colossus I and II facilities in Memphis, covering a total area of 2 million square feet. It’s also spending $20 billion to build a new megacenter in Mississippi. Since the beginning of 2025, the AI side has lavished $20.4 billion on infrastructure, two-thirds of SpaceX’s total investment over that period. In the first quarter, the luxury sector’s billings reached a staggering $7.7 billion. Last year, AI accounted for 60% of R&D across companies, reaching $3.5 billion in the first quarter, double the dollars spent the previous year.
The calculations suggest that Musk has used his hype genius and legendary reputation as a visionary to create highly overvalued stocks. So even though the IPO is expected to generate a rarely seen amount of excitement and raise $80 billion, it only requires SpaceX to sell about 5% of its stake. Therefore, SpaceX will likely accumulate enough cash to fund several years of AI investments.
But as trainers have noted, that’s not the case. As he points out, SpaceX has pre-committed to pay $62.8 billion to third parties, or 78% of its expected revenue. Almost exactly one-third each will be given to early lead investor Valor Equity Partners, Mr. Musk’s X Company and xAI creditors for debt repayment, and to Echostar for “closing the spectrum acquisition.” This leaves less than $18 billion in funding for SpaceX’s growth, primarily by funding the explosion of promised AI computing power. Keep in mind that the AI space has spent a lot of money in the past five quarters alone.
The problem: $18 billion won’t last long, given the increasing spending on AI, including not only capital expenditures but also operating expenses and R&D. Looking at the S-1, it’s clear that free cash flow from the rest of the company can only fund a small portion of what’s needed. by luckestimates that SpaceX’s non-AI division generated just $1 billion in free cash flow last year, which could support what Mr. Musk sees as his flagship engine. The prospectus also mentions the issuance of additional stock and bonds to fast-track data center construction. However, such a move would result in dilution and higher interest expense for shareholders.
Perhaps the most important statement in the entire nearly 400-page document comes on page 53, where SpaceX details the enormous costs and long timelines required to mine the ultra-rich AI deposit. The prospectus states, “We intend to allocate significant capital to expand our computing infrastructure and expect that these deployments will take a multi-year investment period to translate into continued positive Adjusted EBITDA for the AI segment. During this investment period, our capital expenditures will grow similarly rapidly.” Keep in mind that this is a “scale up” from capital expenditures that amounted to $7.7 billion in the first quarter alone.
The voluminous document reveals how heavily SpaceX relies on its new AI arm to achieve the explosive growth in sales and profits needed to reward investors who buy for $1. Appraised value: 5 trillion. Page 11 shows one of the main set pieces of the S-1, with a graph showing the total addressable market for each of its three segments. SpaceX projects total TAM to be a staggering $28.5 trillion. The Coker: Of this, AI accounts for $26.5 trillion, or 93%. Trainor writes, “Large TAMs offer strong growth potential. They also invite competition.” SpaceX is moving from relying on its exclusive satellite business to attracting a pantheon of the world’s most successful companies, from Microsoft to Google. The pie is rapidly expanding, but various rivals are competing for a piece of it, a scenario that is sure to put pressure on prices and profit margins.
Trainer is a master at using discount models to predict how much profit a company will have to make in the future to justify its current huge market capitalization. According to his analysis, SpaceX would need to post annual profits of $189 billion by 2035 to deliver a decent return to shareholders at a $1.5 trillion valuation. At $1.75 trillion, the bogey rises to $245 billion. For 2025, no U.S. company even came close to a lower number. As his trainer has publicly stated, Mr. Musk is ringing the bell in anticipation of “out-of-this-world returns.” And don’t forget: SpaceX debuted as a loss-making company.
If there’s one item in S-1 that investors should pay attention to, it’s not the frivolous talk about solar-powered data centers in orbit, but Musk’s candid admission that making money from AI will take a lot of money and time. It may be right for the people and funds to support him. But while the mood is very high for the most anticipated IPO, the risks are just as great.
