SpaceX’s mega IPO has become one of the most anticipated listings in years. But while investors prepare to pile into Elon Musk’s space and AI ambitions, valuation expert Aswath Damodaran has decided to stay on the sidelines.

The NYU Stern professor, often called Wall Street’s ‘Dean of Valuation’, is not questioning the business quality. In fact, after reviewing SpaceX’s prospectus, he revised parts of his valuation. His issue with the IPO is simple: The price.

Damodaran estimated SpaceX’s equity value at roughly $1.3 trillion, still well below the approximately $1.8 trillion valuation implied by an IPO price of $135/share.

“At the rumored pricing of $1.8 trillion for the company, it is too richly priced for my tastes,” he wrote.

Damodaran stressed that for younger companies like SpaceX, valuation is driven less by current profits & more by assumptions around market size, unit economics and reinvestment.

Here’s why Damodaran is skipping investing in SpaceX, at least for now.

1) Valuation looks too expensive

Damodaran’s updated valuation actually moved higher after the prospectus.

He raised his equity value estimate from around $1.2 trillion to about $1.3 trillion, helped largely by the estimated $75 billion in IPO proceeds that would strengthen SpaceX’s cash position. But that still leaves a gap of roughly $500 billion versus the IPO valuation.

“The enterprise value for SpaceX edges up from $1.21 trillion… to $1.22 trillion,” he wrote, adding that most of the increase came from the influx of IPO cash rather than changes to the underlying business. His takeaway is that a better business does not automatically justify a higher stock price.

2) AI opportunity being overstated

The biggest point of disagreement between Damodaran and the market comes down to artificial intelligence (AI).

According to the prospectus, SpaceX’s total addressable market is estimated at $28 trillion, with nearly $26 trillion attributed to AI. Damodaran said those assumptions are too optimistic.

“If the prospectus is to be believed, SpaceX has the largest TAM of any company in history,” he wrote, “this estimate borders on fantasy.”

He argued that Silicon Valley has increasingly turned total addressable market (TAM) estimates into a marketing exercise and said that his own estimate for the long-term AI opportunity is closer to $3–$4 trillion.

In his view, that creates a dangerous valuation trap: once investors assume a massive market, they begin to justify almost any stock price.

“Once you have a big enough TAM, almost any valuation can be justified.” In his view, that creates a dangerous valuation trap where investors begin backing stock prices with increasingly optimistic assumptions. At the same time, he acknowledged that AI could still become an enormous market. His concern is whether investors are paying today for growth that may never fully materialise.

3) Bigger AI does not mean better economics

One of Damodaran’s biggest changes after reading the prospectus was lowering his long-term operating margin estimate for SpaceX’s AI business to 25% from 45% because competition is intensifying while the cost of building and operating AI infra remains very high. Instead of assuming AI economics will improve with scale, Damodaran argued the opposite may also happen.

“The dynamics that are pushing gross margins down, increased competition and high costs of delivering AI services, will persist, and while AI revenues may continue to grow, profitability may not keep pace.”

According to the SpaceX prospectus, AI accounted for over $14 billion of the company’s total reinvestment in 2025. That spending burden matters because AI businesses require constant investment in chips, computing infra and also model development.

Damodaran’s concern is not that AI fails to scale. It is that AI becomes a massive industry without delivering the level of profitability investors are currently pricing in.

Musk will retain control of more than 85% of voting rights through super-voting Class B shares, according to the prospectus.

That leaves public shareholders with little influence over major decisions.

Damodaran also flagged governance concerns, arguing those concerns become more relevant if SpaceX overestimates the AI opportunity and continues committing large amounts of capital to the business.

“There is little that shareholders can do to restrain the company, if SpaceX doubles down on capital expenditures and acquisitions in the AI space,” he wrote, while describing SpaceX as “an Elon Musk vehicle (with all the pluses and minuses that entails).”

However, the filing strengthened his conviction in SpaceX’s rocket launch and connectivity operations. For the launch business, he increased his target operating margin estimate to 45% from 40%, citing the cost advantages created by reusable rockets.

For Starlink, subscriber numbers increased from 5 million to 10.3 million, even as average monthly revenue per user declined from $99 to $66.

“The company is best positioned in the connectivity business to generate both revenue growth and profits in the near term,” he wrote. He continues to estimate operating margins of around 60% for the connectivity business over time.

Even as he remains cautious on AI, his confidence in SpaceX’s launch and satellite broadband operations increased.

He won’t buy it now but won’t short it either

Despite believing the IPO is overpriced, Damodaran is not predicting the stock will fall after listing. In fact, he said he “would not be surprised in the least” if SpaceX jumps after listing as investor enthusiasm and AI optimism drive demand.

“My valuation of SpaceX was driven by my interest in the company and belief that it is in unique, cutting-edge businesses,” he wrote.

“That does not mean that I will never buy the stock… If the price does drop by enough, my decision would change accordingly.”

For now, though, Damodaran believes investors buying at $135 are making what he calls a “loaded bet on AI and Elon Musk.”