SpaceX's market value has already evaporated by 1 trillion dollars.

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SpaceX’s stock price has continued to fall, with its market capitalization evaporating by more than $1 trillion since its IPO peak. The rocket and AI giant founded by Elon Musk is facing the most severe valuation test since its listing.

On Friday, SpaceX’s stock dropped 5.4%, closing at $123.99 per share, bringing its market value down to $1.63 trillion. On June 16—the third trading day after listing—the company’s market cap once reached $2.64 trillion. The immediate trigger for this downturn was the forced abort of the company’s flagship Starship rocket launch due to an engine malfunction.

The continued decline has pushed SpaceX’s stock below its IPO price of $135. Joe Gilbert, portfolio manager at Integrity Asset Management, commented, "The timing of the launch failure isn’t ideal for the company’s narrative, but failure is an inherent risk in this narrative. Investors are reducing positions, reassessing valuations, optimism is gradually fading, and this is also suppressing previously high valuation multiples."

Starship Engine Failure Sparks Sell-Off

On Thursday, SpaceX aborted the Starship rocket launch after several engines failed to ignite. Musk later announced on platform X that the company would replace two Raptor engines, and the next launch attempt may be postponed until early next week.

SpaceX says it will try to launch again. Brian Gesuale, an analyst at Raymond James, noted in a report to clients Friday that even with delays, if the launch succeeds next week, the interval between two Starship flights would shrink from 221 days before to less than 60 days. Gesuale initiated coverage of SpaceX on July 7 with a “Strong Buy” rating and a price target of $800—highest on Wall Street—about 545% above Friday’s closing price.

Gesuale also emphasized, "Such anomalies will accompany Starship’s aggressive R&D process—this is an inevitable cost for breakthroughs in reusability, payload capacity, speeding up Starlink V3 deployment, and future NASA Artemis missions."

Starship is the Key Pillar of SpaceX’s Commercial Strategy

Starship’s strategic significance for SpaceX cannot be underestimated. According to the company’s IPO prospectus released in June, SpaceX has already invested over $15 billion into Starship's development. The rocket is the central vessel for building space data centers, expanding the Starlink satellite communications network, and ultimately enabling crewed lunar and Mars missions.

Clear Street analyst Greg Pendy pointed out, “Any substantial delay in progress will directly impact the expansion of Starlink and direct-to-cell services, because lower launch costs are crucial to rapid satellite deployment.”

Ken Herbert and Jonathan Atkin, analysts at RBC, believe Starship’s cost savings will be a key catalyst unlocking SpaceX ambitions—including so-called "orbital computing" business—but also warn that a repeatable launch cadence is "essential." They wrote, "We understand the de-risking path is nonlinear, and believe investors may be forced to accept this nonlinear rhythm."

Wall Street Still Bullish Overall

Despite recent sell-offs, Wall Street remains mostly positive on SpaceX. According to Bloomberg tracking, over 80% of analysts rate the stock as a buy or equivalent, with an average price target of $235.34—about 90% upside from current levels.

However, structural pressures remain. SpaceX joined the Nasdaq 100 Index earlier this month, and the lock-up period for insider holdings will expire gradually in coming months, releasing more shares to the market. Mark Malek, CIO of Siebert Financial, said, "Considering the upcoming lock-up expirations, many investors may have reassessed their initial investment thesis, and previously hesitant potential buyers are waiting for a lower entry point—as valuations gradually return to reasonable levels, the probability of such opportunities is quite high."

According to the Wall Street Journal, SpaceX is negotiating to sell computing power to the U.S. Department of Defense, temporarily boosting the stock. The company already has similar deals with Alphabet's Google and Anthropic PBC.

The continued slide in SpaceX’s stock poses a potential threat to the ongoing AI-related IPO boom. AI is an important part of SpaceX’s IPO narrative—positioning its space data centers as a strategic pivot to capture an estimated $26.5 trillion market. This record-breaking IPO brought Wall Street investment banks lucrative gains, pushing equity underwriting revenues to their highest quarterly levels since 2021. Now, as SpaceX shares fall below the IPO offering price, doubts are growing over whether highly valued tech companies can maintain strong performance after listing.

Risk disclosure and disclaimerThe market involves risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment goals, financial situation or needs. Users should consider whether any opinions, viewpoints or conclusions in this article suit their particular circumstances. Invest accordingly at your own risk. ```