For nearly two decades, Elon Musk has transformed science fiction into tangible achievements, enriching believers and securing significant leeway from Wall Street. Beyond rockets and electric vehicles, his ventures are reshaping perceptions on another front—persuading analysts to adapt conventional valuation frameworks and apply multiples based on what scholars term "strategic optionality."
Musk's focus on futuristic ventures has led analysts to categorize Tesla Inc. more as a robotics firm than a traditional automaker, setting the stage for SpaceX to pursue a staggering $2 trillion valuation in its imminent public offering. While critics highlight the exorbitant valuations, the market's financial endorsement of Tesla's vision has led many to conclude that the greater risk lies in not participating in SpaceX's IPO.
Aswath Damodaran, a finance professor at New York University renowned for his analytical rigor, remains unconvinced by the targeted valuation figure. Although he would not invest at a $2 trillion price tag, preferring a valuation closer to $1 trillion, he acknowledges SpaceX possesses substantial long-term growth potential.
"The strategic optionality is currently more significant with SpaceX than with Tesla," Damodaran stated in an interview. "SpaceX is so far ahead of its competitors that it is in a stronger position than Tesla to realize that optional value."
The valuation premium analysts attach to Tesla's more speculative business lines stems from Musk's proven history of industry disruption—essentially, his ability to generate wealth for investors. For SpaceX to validate a valuation exceeding $2 trillion, as reported, any financial model must account for this "Musk premium."
Damodaran emphasized the track records of both companies: "Credit must be given, as he has built two entities that are genuine technological marvels."
Tesla's Growth Narrative
Tesla has traded for years at a valuation that dramatically exceeds even the most highly valued of its "Magnificent Seven" peers, boasting a forward price-to-earnings multiple over five times that of Apple Inc.
No Wall Street analyst assigns significant long-term value to Tesla's core automotive operations. Little attention is paid to its planned capital expenditure exceeding $25 billion this year. To justify its current $1.59 trillion market capitalization, analysts are focusing on potential from artificial intelligence, autonomous vehicles, and the long-in-development Optimus robot project.
More than two dozen analysts with buy ratings on the stock justify their stance based on long-anticipated products like the Cybercab and Optimus, rather than on modest growth in vehicle deliveries.
Optimistic investors are counting on the company to launch a nationwide Robotaxi service and commercially viable humanoid robots. A review of analyst research indicates that projections for Optimus and Robotaxis constitute over half of their sum-of-the-parts valuation models. Most are willing to project profits from these ventures far into the future.
For instance, Piper Sandler analyst Alexander Potter described vehicle sales as a "minor long-term revenue source" in a May 10 note, stating his view that "Tesla isn't a car company." Car sales are projected to peak in approximately five years, with Robotaxi services, full self-driving software licenses, subscriptions, and insurance expected to form the bulk of estimated revenue decades from now.
Skeptics are equally prominent. UBS analyst Joseph Spak cautioned clients about the high costs associated with developing physical AI infrastructure, noting the $25 billion in planned spending for this year is merely a starting point. He also characterized Musk's commentary on the Robotaxi and Optimus timelines during the April earnings call as "more subdued."
Valuing SpaceX's Ambitions
SpaceX's ambitious projects are, if anything, even more challenging to value. Beyond core operations like U.S. government launch contracts and the Starlink satellite internet business, a significant portion of a potential $2 trillion valuation would hinge on Musk's stated goals of deploying data centers in space, establishing a lunar base, and eventually colonizing Mars. The theoretical total addressable market is, for starry-eyed believers, essentially limitless.
Tesla's stock, which has surged nearly 3,000% over the past decade and created immense wealth for its backers, provides a tangible foundation for the SpaceX investment thesis: the powerful fear of missing out (FOMO).
"Many analysts have already pre-committed to buying SpaceX shares because they feel they cannot afford to be left out," explained NYU's Damodaran. "The FOMO is intense because they've witnessed the consequences of missing previous opportunities."
Ark Investment Management, an existing SpaceX investor and long-term Tesla shareholder, contends that a $1.75 trillion valuation is "supported by a plausible trajectory" for the company's core rocket and AI businesses.
"Musk's objectives are extraordinarily ambitious by any historical measure, and SpaceX has consistently demonstrated an ability to accelerate timelines that skeptics once deemed unrealistic," the firm wrote on April 20. "While not a guarantee, we believe that track record is a significant data point."
The Divide Between Skeptics and Believers
Musk's history of disproving critics—or at least securing enough long-term investor faith in his vision—fails to persuade detractors who see financial projections that appear unrealistic.
For Michael O’Rourke, Chief Market Strategist at Jonestrading Institutional Services with over 30 years of Wall Street experience, the sales pitch is challenging to rationalize. "You're discussing a valuation at roughly 100 times revenue," he said, referencing SpaceX's targeted valuation against reported sales of approximately $20 billion last year.
Even if space-based data centers become feasible, investors have little evidence they will be more cost-effective than terrestrial facilities, for example.
"You are paying for success that has not yet been achieved. It's a scenario filled with hype, and whether driven by retail enthusiasm or not, it is disconnected from investing in a company valued on its ability to generate profitable returns," O'Rourke stated.
Regardless of the rationale for assigning high multiples to early-stage, highly speculative business lines, a critical issue is whether Musk's loyal retail investor base will participate en masse in the IPO and initial trading. The company plans to allocate up to 30% of the offering to retail traders, which, in a $75 billion share sale, would equate to $22.5 billion.
According to Vanda Research data through May 14, that amount would more than double the total net buying of Tesla shares by individual investors over the past year. In fact, it would surpass the total net inflows into all assets—from individual stocks to exchange-traded funds—over the past month.
For Jonestrading's O'Rourke, the SpaceX IPO could signal that the bullish market cycle may be nearing its peak.
"These are characteristics typically observed near market tops and during bubbles," O'Rourke remarked. "When we look back a year from now, I believe this will be viewed as a key signal."
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