Episode #91: The $1.5 Trillion Question: Why SpaceX's IPO Math Doesn't Add Up

In this episode of the Stewart Squared podcast, host Stewart Alsop and his father Stewart Alsop II dig into the major AI and tech IPOs hitting the market, with SpaceX leading the charge at a controversial $1.5 trillion valuation despite just $20 billion in revenue. They break down how SpaceX's massive S-1 filing (so big it crashed Claude's context window) reveals a company now bundling together Starlink, rocket launches, X (Twitter), and the struggling xAI/Grok business—with key researchers having already jumped ship after getting their SpaceX stock. The conversation covers Anthropic's explosive revenue growth (projecting $10 billion in Q2 alone) and their smart move renting Musk's underutilized data center for $1.25 billion, OpenAI's pending IPO, Apple's quiet but strategic AI approach using on-device models and partnering with Gemini instead of OpenAI, and why the institutional investors might balk at SpaceX's aggressive pricing when the IPO drops on June 12th. Stewart II shares his contrarian take: he'd never touch SpaceX stock at this valuation but is seriously considering Anthropic, while explaining the arcane details of revenue recognition, vesting schedules, and why Elon Musk's singular track record lets him operate by different rules than any other CEO.

Timestamps

00:00 Welcome and SpaceX IPO discussion begins, exploring the $20 billion valuation and mathematical implications of the massive offering
05:00 Anthropic renting Musk's data center for over a billion monthly while Grok struggles, researchers leaving xAI after receiving SpaceX stock
10:00 Institutional investors may decline SpaceX shares at ridiculous valuation compared to Apple's $400 billion revenue and NVIDIA's profitability
15:00 Apple's on-device AI strategy with small models and Gemini integration while Musk fails in foundation models
20:00 Revenue recognition differences between companies, Anthropic projecting $10 billion quarterly revenue with conservative accounting practices
25:00 SpaceX revenue breakdown showing Starlink at $11 billion dominating over rocket business, Twitter and xAI tucked into valuation
30:00 Comparing SpaceX's $20 billion revenue to Apple's $400 billion while discussing material disclosure requirements in IPO filings
35:00 Musk's singular achievement changing space and car industries, earning unprecedented valuation despite rational market concerns
40:00 Argentine politics and Milei's challenges, parallels to Trump's midterm influence and Peter Thiel's strategic positioning
45:00 Final thoughts on IPO opportunities, avoiding SpaceX at current valuation while considering Anthropic's rapid growth potential

Key Insights

1. SpaceX is going public at a 1.5 trillion dollar valuation while generating only 20 billion in revenue, creating significant concerns about whether the IPO will succeed. The company is attempting an unusually fast timeline from S-1 filing on May 20th to going public on June 12th, bypassing the typical two month roadshow process. There is a real possibility the offering could fail because institutional investors who must buy 70% of the shares may decline at this valuation, seeing no path for the stock to appreciate further.
2. The valuation appears disconnected from fundamentals when compared to companies like Apple with 400 billion in revenue worth 4 trillion or NVIDIA with 85 billion in revenue worth 5 trillion. SpaceX would need to grow revenue from 20 billion to potentially 100 billion and achieve profitability to justify even being in the multi-trillion dollar valuation range. The aggressive pricing likely comes from Musk himself rather than the investment banks, as he controls the process with his ownership structure.
3. Anthropic is experiencing explosive revenue growth, jumping from 4 billion in one quarter to a projected 10 billion in the second quarter, putting them on track for 40 to 50 billion in annualized revenue. Most remarkably, they claim they will be profitable in the second quarter, which would be unprecedented for a foundation model company. Their strategic deal to rent Musk's underutilized data center for 1.25 billion monthly solved their infrastructure problems while giving Musk revenue to cover his failed Grok investment.
4. Elon Musk consolidated multiple companies including Twitter, xAI, SpaceX and Starlink into one entity still called SpaceX, creating a complex conglomerate that will be difficult for investors to evaluate. The xAI portion has essentially failed as a foundation model competitor, with dozens of researchers leaving after the merger gave them valuable SpaceX stock as an exit. Twitter contributes roughly 2 billion in revenue, the rocket business does 4 billion, but Starlink is the real driver at 11 billion and growing rapidly.
5. Apple has been quietly working on small on-device AI models embedded in their operating systems rather than pursuing foundation models, and they will likely deliver on their 2024 promises using Google's Gemini instead of OpenAI. This strategic approach of focusing on practical on-device capabilities while partnering for cloud capabilities may prove more successful than trying to build their own foundation model. The company avoided the mistake of announcing capabilities before they were ready, then pragmatically adjusted their approach.
6. Once you fall behind in the foundation model race, you cannot catch up, which explains why both Musk with Grok and Zuckerberg with Meta have struggled despite massive investments. The leaders like Anthropic and OpenAI have such strong momentum and embedded positions that competitors cannot overcome the gap. This dynamic is similar to how Palantir embedded itself so deeply in government and commercial customers before LLMs that they remain entrenched despite new AI capabilities.
7. The simultaneous IPOs of SpaceX, OpenAI and Anthropic represent different investment propositions, with SpaceX being personality and potential driven, OpenAI having revenue recognition questions, and Anthropic showing the strongest fundamentals with explosive growth and a path to profitability. All three will have founder-controlled voting structures similar to Meta where Zuckerberg has 60% control, allowing these leaders to pursue long-term visions regardless of public market pressures. The timing is largely coincidental rather than coordinated, driven by each company's specific capital needs and market conditions.