While Wall Street is eager to get a piece of SpaceX’s historic IPO, one prominent hedge fund manager believes investors are missing the big picture on what could ultimately be the biggest factor in the company’s valuation.
Gene Munster, managing partner at Deepwater Asset Management, recently shared his thoughts on SpaceX, saying what he thinks is the most important aspect of SpaceX’s value and what investors are overlooking.
It can be summed up in two words: sovereign AI.
“Investors looking at SpaceX’s IPO are focused on its launch business and Starlink subscribers,” Munster wrote. “They’re missing the real story. Through a group of entities controlled by Elon, SpaceX has quietly amassed the only set of assets capable of building fully sovereign AI.”
This term refers to an end-to-end AI system that is fully controlled by the owning company. Such systems do not rely on external providers at any layer. Munster believes SpaceX can accomplish this, and if it does, it will be a real competitive advantage for the company.
In his view, SpaceX has four key pillars needed to achieve sovereign AI: launch exclusivity, Starlink’s hyperscalar network, Grok’s proprietary AI model, and Musk’s Terafab AI chip production.
“These four pillars create a closed-loop intelligence system that spans from raw silicon to satellite distribution,” Munster wrote.
The hedge fund manager acknowledged that while many Big Tech leaders have part of the sovereign AI equation, no one has it all. He believes Google is the next closest, but argues that SpaceX is in the best position because Google still relies on chips developed by other companies.
Munster recently called Google’s parent company Alphabet the best stock to own in the Magnificent Seven, citing the company’s progress on the AI front.
“SpaceX is building an AI equivalent to the Apple model,” he wrote. “Design the chip, manufacture the chip, build the model, train it on your own data, and deliver it through your own network. From silicon to satellite, every tollbooth is yours.”
Munster added that another key advantage SpaceX has over Google is that it manufactures rockets, which is part of the company’s large structural advantage in the technology space.
He said the total economic value of sovereign AI is difficult to assess, but he believes it is the key for bulls.
“If vertical integration is the path to margin in the intelligence economy (and we believe it is), then SpaceX has a compelling structural advantage over any other company in the world,” Munster said.