Three years ago, Nvidia (Nasdaq: NVDA) became the stock that forced Wall Street to take artificial intelligence seriously.
And I believe we’re about to see the same thing happen in space.
Today, Elon Musk’s SpaceX went public in what’s expected to be the largest IPO in American history. At a reported valuation of roughly $1.75 trillion, it debuted as one of the most valuable companies on Earth.
It’s such a significant event that I almost feel legally obligated to write about it.
But while most investors are debating whether SpaceX is worth that much money, I think they’re missing the bigger picture.
Because the real story isn’t about SpaceX going public.
It’s that space is about to become a mainstream market.
The Nvidia Effect
The easiest way to understand what’s happening today is to look back at Nvidia.
By the start of 2023, artificial intelligence had become one of the most talked-about technologies on the planet. But many investors still weren’t sure how it would become a real business.
Then Nvidia started reporting explosive demand for the chips needed to train and run AI systems.
Image: Nvidia
And suddenly the AI story looked very different.
Investors realized that every chatbot, image generator and AI assistant needed an enormous amount of computing power running behind the scenes.
Which meant AI wasn’t just a software story.
It was also a story about data centers, electricity, networking equipment and the companies building the infrastructure to support it.
That changed everything.
Smart investors stopped looking only at AI software companies and started looking at the businesses supplying the digital picks and shovels needed to power the entire industry.
That’s exactly the approach I used to identify winners like Advanced Micro Devices (Nasdaq: AMD), Micron Technology (Nasdaq: MU) and Navitas Semiconductor (Nasdaq: NVTS) long before most investors understood how big the AI buildout would become.
And it’s the same approach I’m using to think about SpaceX today.
Because while SpaceX may become the face of the space economy, it won’t be the only company that benefits from its growth.
Most people think of SpaceX as a rocket company.
Image: SpaceX
That’s understandable. The rocket launches are the exciting part.
But investors aren’t assigning a $1.75 trillion valuation to SpaceX simply because it knows how to launch things into orbit.
They’re assigning that valuation because of everything those launches make possible.
Since 2019, SpaceX has launched more than 9,000 Starlink satellites, creating the largest satellite constellation ever assembled.
Starlink now serves millions of customers across more than 100 countries and territories. The company has become an increasingly important provider of communications services for governments, militaries and businesses around the world.
That’s a very different business than simply launching payloads into orbit. In many ways, SpaceX is building the backbone of a new space economy.
And Wall Street is already preparing for it.
Even before SpaceX started trading, some of Wall Street’s largest index providers were debating how to handle a company this large.
Nasdaq, which manages the Nasdaq-100, and FTSE Russell, which oversees the Russell family of indexes, recently changed their rules to help giant IPOs like SpaceX enter those indexes more quickly.
S&P Dow Jones, which manages the S&P 500, chose not to.
But the bigger takeaway is that a space company has become large enough to force Wall Street’s most important indexes to think about how it fits into their portfolios.
To me, that’s one of the clearest signs that space is moving into the financial mainstream.
Remember, Nvidia didn’t just create demand for Nvidia. It created demand for the entire infrastructure of AI.
I believe the same thing will happen with space.
A successful SpaceX won’t just benefit SpaceX. It’ll draw more attention, more research coverage and more investment capital into the broader space economy.
Investors will start looking at the companies building satellites, supplying communications networks, developing defense technologies and helping governments and businesses monitor the Earth from orbit.
And they’ll start looking at the companies providing the components, software and infrastructure that make all of those systems work.
My team and I have already prepared for this eventuality.
While most investors focused on rocket launches, we’ve been researching companies positioned to benefit from the growing commercialization of space.
In many cases, those stocks have been moving long before today’s SpaceX IPO.
Here’s My Take
Investors who ignored the space sector are already asking if they’re too late.
I don’t think they are.
But at a reported valuation near $1.75 trillion, getting into SpaceX won’t be cheap. The company still has losses. Some of its most ambitious plans remain unproven. And any stock tied to this much excitement can become volatile very quickly.
I’m less interested in what SpaceX does next week than what happens over the next decade.
Because some analysts believe this market could eventually be worth more than $1 trillion.
And if they’re right, then today’s IPO may be remembered for much more than creating one of the world’s most valuable companies.
After all, Nvidia forced Wall Street to take AI infrastructure seriously.
And I believe SpaceX could be the catalyst that launches the space economy into the financial mainstream.
Regards,
Ian King
Chief Strategist, Banyan Hill Publishing
Editor’s Note: We’d love to hear from you!
If you want to share your thoughts or suggestions about the Daily Disruptor, or if there are any specific topics you’d like us to cover, just send an email to dailydisruptor@banyanhill.com.
Don’t worry, we won’t reveal your full name in the event we publish a response. So feel free to comment away!
