Ever since SpaceX released its registration statement, revealing key financials, investors have gone back and forth about the company’s valuation, which media outlets expect to be in the range of $1.75 trillion to $2 trillion.

Now, one Wall Street analyst is suggesting that the company’s initial public offering significantly overvalues the company.

In a recent research note, Morningstar analyst Nicolas Owens said his team thinks the company is only worth about $780 billion, implying a 55% lower valuation from $1.75 trillion.

Here’s why.

The artificial intelligence unit is a big question mark

Earlier this year, SpaceX acquired Elon Musk’s artificial intelligence company, xAI, which owns the Grok AI digital assistant and social media platform X. Musk is also the founder and CEO of SpaceX.

XAI also owns and operates data centers. This could be an advantage down the line because it will not rely on third-party data center companies.

Image source: Getty Images.

However, right now it’s a difficult business to run. The unit generated $818 million of revenue in the first quarter of 2026 and an operating loss of nearly $2.5 billion.

In 2025, the unit generated $3.2 billion of revenue and an operating loss of nearly $6.4 billion.

Furthermore, the AI unit is quite capital-intensive. Roughly $12.7 billion of capital expenditures were devoted to the AI unit in 2025, and already $7.7 billion in the first quarter of 2026.

Owens and his team found xAI’s “economic moat indeterminate” and think it presents a “material threat of value destruction…”

Now, the good news for investors early on is that SpaceX is expected to be quickly added to most major market indexes within weeks of its trading debut.

The company could also be added to the broader benchmark S&P 500 just six months after going public.

This will force every fund tracking such indexes to buy SpaceX stock. Morningstar believes this will help support the stock and even potentially allow it to rise in the near term.

However, it is after these mechanical maneuvers that the stock will face a more uphill battle.

“We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO,” Owens wrote.

Using a discounted cash flow analysis, Owens and his team estimate that SpaceX’s Starlink satellite internet business and its launch business are worth roughly $611 billion in enterprise value.

They assigned the AI business an additional $170 billion enterprise value in “probability-weighted scenarios.”

Investors should be patient

SpaceX is an impressive company, particularly with Starlink, its low-Earth-orbit satellite internet business that has a considerable lead in the sector, and its financials.

The company is asking for a high valuation, especially given xAI’s drag on the business. Now, SpaceX may very well get away with it, considering Musk’s cult-like following and hype around the IPO.

SpaceX will also have support from all the projected index inclusions. However, I think investors who buy the stock in the beginning will be operating in the Wild West.

I agree with Owens that there is a good chance the stock will be cheaper down the line, likely six months after its IPO, when all index inclusions have occurred, and lock-up provisions have expired.

Furthermore, waiting will give investors time to see SpaceX report a few quarters of earnings results, so I think investors are best off staying on the sidelines for the IPO.