Has SpaceX Popped The AI Bubble?
Not yet, but it might.
Many others, including myself, have stated that SpaceX’s IPO could have popped the AI bubble if it didn’t go well. Well, Musk’s AI/social media/rocket company hasn’t exactly had a smooth ride. After a rapid initial climb, over just a week of trading, SpaceX lost 28.7% of its value from its peak (read more here)! In fact, its share price has crashed so much that it is now below its debut price. With its share price rising and crashing back to Earth as quickly as one of countless failed Starship launches, it’s hard to call this an out-and-out success. This mini boom-and-bust is not a good sign for an industry that requires exponential growth. As such, there is an argument that SpaceX has just popped the AI bubble—we just don’t know it yet.
Let’s start with what we mean by the AI bubble bursting. According to Investopedia, an economic bubble is when trades are made “at a price, or within a price range, that greatly exceeds the asset’s intrinsic value.” SpaceX’s, OpenAI’s and Anthropic’s current valuations fall well within this definition. Investopedia defines bubbles as having four stages, with the final ‘pop’ being the panic stage, which it defines as “asset prices reversing and falling, often as quickly as they had risen. Investors want to liquidate them at any price. Asset prices decline as supply outshines demand.”
This is why SpaceX’s IPO is so shocking to those at the top of the AI bubble. Its rapid fall suggests that investors were more interested in flipping or liquidating their shares, even at a loss. It portrayed these investors as seeking a get-rich-quick flip scheme, more akin to trading card scalpers than actual long-term investors. Such speculative investors are highly fickle and ready to sell at the drop of a hat. Now, I must add that this is only how it appears. Thanks to how SpaceX structured its IPO, such volatility should be expected. But if this downward trend continues, and SpaceX insiders liquidate as soon as their lock-up periods expire, it will confirm this is the case.
However, it seems this concern is enough to deeply spook the major AI players.
As reported by the New York Times last week, OpenAI is considering delaying its IPO until 2027, citing SpaceX’s IPO and claiming they do not think they can reach their $1 trillion target price under today’s market conditions. In other words, they have witnessed the SpaceX sell-off, and it has made them deeply worried.
