SpaceX is set to begin trading this week in what could become the largest initial public offering in history. The company priced its IPO at $135 per share, valuing Elon Musk's aerospace, satellite communications, and artificial intelligence company at roughly $1.7 trillion. The deal is expected to raise approximately $75 billion, instantly making SpaceX one of the most valuable publicly traded companies in the world.

That headline number alone has captivated investors.

Yet beneath the excitement lies a growing debate over whether public investors are being asked to pay too much for a company that generated less than $20 billion in revenue last year and reportedly lost nearly $5 billion. While few question SpaceX's technological achievements, many are questioning whether the valuation leaves room for investors to earn attractive returns.

The concerns were front and center in a recent interview between AInvest's Adam Shapiro and Horizon Investments Chief Investment Officer Scott Ladner, who argued that while SpaceX may ultimately become one of the most important technology companies of the next decade, investors should be prepared for a volatile and potentially challenging ride.

A Small IPO for a Massive Company

One of the biggest misconceptions surrounding the deal is that the entire company is coming public.

In reality, only about 3% to 5% of SpaceX's shares are expected to be available for public trading initially. That means investors are buying access to only a small fraction of the company's equity while insiders continue to control the overwhelming majority of shares.

Ladner believes this dynamic creates an unusual supply-and-demand setup.

"We're going to get a bunch of basically IPOs," he told AInvest. "They're not going to be IPOs, they're going to be POs. They're going to be offerings of stock for several weeks on end as we come through the fall into early winter."

His concern centers around lockup expirations. As insider restrictions expire between October and January, a significant amount of stock could enter the market. Unlike many large IPOs, SpaceX is not expected to receive meaningful index inclusion immediately, limiting the amount of passive buying available to absorb that future supply.

That could create a persistent headwind for the shares.

Demand Is Strong, But Not Extraordinary

Investors have understandably focused on reports that the IPO is oversubscribed.

According to reports, approximately $150 billion of demand has emerged for roughly $75 billion worth of stock being offered. That means the deal is currently about two times oversubscribed.

While that sounds impressive, some market observers argue it isn't nearly as strong as investors might expect for a company carrying a $1.7 trillion valuation and Elon Musk's name.

Traditionally, the hottest IPOs are often four to five times oversubscribed before pricing.

As one analyst noted, being two times oversubscribed is essentially the minimum requirement for a successful IPO rather than evidence of overwhelming demand. This demand dynamic could improve in the coming sessions, but for now, it is viewed as a lukewarm reception at best.

That may explain why expectations surrounding the offering have become increasingly conservative in recent days.

Ironically, that could be a positive development. The lower expectations become, the easier it is for SpaceX to exceed them. Investors have spent weeks debating whether the stock would immediately double. More recently, the conversation has shifted toward whether the valuation is simply too aggressive.

That reset may ultimately help the stock's long-term performance.

The Bull Case Is Easy to Understand

Despite the valuation concerns, few analysts dispute that SpaceX owns several extraordinary businesses.

The company dominates commercial rocket launches, controlling an estimated 60% to 70% of the market. Starlink has become the leading satellite internet platform globally and continues expanding rapidly.

Ladner compared the company's current position to Amazon's early years.

"Amazon for forever was a company that made revenue hand over fist and made market share hand over fist," he said. "The thought was if they command a big enough share of the market, they can basically turn on the money-making spigots whenever they want."

He sees similarities in SpaceX's ability to build dominant market positions before fully optimizing profitability.

The space business itself appears highly attractive. Ladner estimates margins in some launch-related operations could eventually reach 60% to 70%, while Starlink remains a fast-growing connectivity platform with attractive economics.

The AI Question

The biggest source of both opportunity and risk is artificial intelligence.

According to Ladner, AI represents the largest part of SpaceX's total addressable market, but also the most uncertain.

"The biggest part of that is the largest opportunity set," he said. "And that's going to be the part of the business that's going to have the toughest sledding."

Unlike launch services and satellite internet, AI pits SpaceX directly against OpenAI, Anthropic, Google, Microsoft, Amazon, and countless startups.

The company's ambitious plans for orbital AI infrastructure and space-based data centers remain largely theoretical. While the concept has captured investor imagination, it has yet to be commercially proven.

Morningstar recently estimated SpaceX's fair value at just $63 per share, less than half the IPO price. Even in its most optimistic "moonshot" scenario, Morningstar arrived at a valuation of roughly $154 per share and assigned only a 7% probability to that outcome.

That highlights just how much future success investors are already paying for.

The Valuation Problem

Perhaps the biggest concern is simply arithmetic.

At roughly $1.7 trillion, SpaceX trades at an estimated 90-plus times annual revenue. For comparison, many successful technology IPOs have entered public markets at a fraction of that multiple.

To justify today's valuation, SpaceX must successfully scale Starlink, maintain leadership in launch services, commercialize AI initiatives, avoid regulatory setbacks, manage capital spending, and continue growing at a rapid pace for years.

That is a lot to ask.

As one critic noted, investors are not simply buying a company. They are buying a vision of what Elon Musk might create over the next decade.

Bottom Line

SpaceX may eventually justify its enormous valuation. The company possesses world-class technology, dominant competitive positions, and one of the most ambitious founders in business history. But investors should recognize that much of that optimism is already reflected in the stock price.

Ladner's conclusion may offer the best roadmap. He believes investors probably need some exposure because "if he's right, it is massive." However, he cautions against rushing in all at once, noting that many high-profile technology IPOs experience drawdowns of 50% or more during their first year as public companies.

For long-term believers in space, AI, and satellite communications, SpaceX may become a cornerstone holding. For everyone else, the biggest IPO in history may also be one of the most difficult valuation exercises Wall Street has ever faced.