Steven Spielberg has an alien movie opening this month, but that may not be the biggest science fiction blockbuster of the summer. That could be the SpaceX initial public offering.
As part of its pitch to sell shares on the stock market, Elon Musk’s aerospace and technology company says it will capture over $28 trillion of the A.I. market (nearly the size of the entire United States economy). It says it plans to launch one million satellites to put data centers in outer space (though the technology doesn’t yet exist). And it vows to hand Mr. Musk huge amounts of stock if he establishes a Mars colony that houses one million people (though no human has been within about 35 million miles of the planet).
Mr. Musk could well believe his own projections. What’s harder to understand is why so many investors do, given his recent track record of missed deadlines, abandoned products and failed business predictions.
Remember, Mr. Musk said he would nearly triple Twitter’s advertising revenue in five years. (It’s down approximately a third.) He claimed the Boring Company, then a SpaceX subsidiary, had received “verbal” government approval for a superspeed hyperloop that would take you from New York to Washington in 29 minutes. (The plan went nowhere.) He said Tesla’s Cybertruck could operate “briefly” like a boat. (A driver had to abandon his vehicle in a lake.)
Still, investors are largely buying what Mr. Musk is selling. SpaceX’s listing on the Nasdaq this month is expected to be one of the largest I.P.O.s of all time.
Why?
To understand what’s going on, you have to see the game for what it is. Whether it makes sense or not, the market has heavily rewarded Mr. Musk’s utterances for some time. There are parallels to the meme stock phenomenon, in which a company’s shares soar primarily on the strength of viral social media hype.
Not everyone approves of the practice of investing from a tweet or a Reddit post — it reflects “overconfidence, financial ignorance and a wealth-reducing love of gambling,” declared the economists Owen Lamont and Richard Thaler. That was three years ago; little has changed since except for the proliferation of even more ways to bet.
And right now, many members of the establishment — investment banks, venture capital firms and institutional investors — are making a lot of money by embracing Mr. Musk’s declarations rather than questioning them.
In such a world, who cares if Mr. Musk said SpaceX would send a spacecraft to Mars by 2018? Or even 2022? Who cares if the company still hasn’t delivered on the $2.9 billion contract it won five years ago to build a lunar lander for NASA? Who cares if several SpaceX Starship test flights last year ended in failure?
To be clear, SpaceX is a legitimately successful company, a pioneer in developing new space technology with a near-hammerlock on the orbital launch business. Starlink, its satellite-based internet service, has been a game changer for global connectivity, generating over $11 billion in revenue last year, or 61 percent of SpaceX’s total sales.
That’s real money, albeit a rounding error against the reported $1.75 trillion valuation SpaceX is targeting, which would make it one of the 10 most valuable companies in the world. As a SpaceX adviser explained: “The valuation makes no sense. But Elon is great at getting people to dream.”
Companies issue projections when launching an I.P.O., as the premise of the exercise is to allow members of the public to bet on a company’s future growth. But for decades, the SpaceX level of naked wishcasting was limited by the prospect of potential legal trouble. Then in 1995, Congress passed the Private Securities Litigation Reform Act. Designed to ward off excessive lawsuits, it gave companies far greater freedom in what they were allowed to say about their futures.
The continued weakening of traditional restraints eventually granted executives a wide berth for “speculative optimism,” said Amit Seru, a finance professor at the Stanford Graduate School of Business. “Combine that with a culture increasingly comfortable with long-duration technology bets, and the equilibrium naturally shifts toward more aggressive storytelling.”
Mr. Musk’s success with Tesla, his electric vehicle company, has played a role in the stock market’s transformation. The business overcame long odds and shifted the entire world toward an electric-vehicle future. Along the way, Mr. Musk built himself a loyal fan base via social media and created a phenomenon where his followers were willing to invest in his declarations — from Tesla to Dogecoin — based mostly on their faith in him (or, at a minimum, their faith that others would buy in based on what he had to say).
SpaceX and Tesla’s valuations fundamentally challenge the conventional assumption that money follows performance. Despite tanking Tesla’s brand, and two straight years of declining sales, Mr. Musk received a $1 trillion pay package last year. Tesla is worth almost five times more than Toyota, though it sells approximately one-sixth the number of cars. That’s because Tesla now says its future isn’t cars anymore, but the humanoid robots it will someday produce.
Mr. Musk’s deal-making and the fees it generates make his ecosystem highly lucrative. The result is a tangled web of financing deals involving all the same people.
First, investors gave Mr. Musk billions of dollars to acquire Twitter (now X), only to see the value of their investment collapse as he alienated advertisers and drove users off the platform. Some of those same parties, like Fidelity and VyCapital, funded development of Mr. Musk’s next venture, an artificial intelligence company called xAI, which he merged with X, folded into SpaceX, and valued at $250 billion. This is like buying a house, then selling it to yourself for about five times the price and announcing you’ve made a fortune. Some of those same banks that advised Twitter during Mr. Musk’s acquisition, like Goldman Sachs and JPMorgan, will now collect fees on the SpaceX IPO itself, which will then help X pay off billions of dollars of debt.
In Silicon Valley, the result right now is a merry-go-round of profit and consequence-free failure as the same insular coterie of investors, entrepreneurs and banks continually fund one another’s next moves.
Ryan Breslow, the chief executive of the checkout technology company Bolt, stepped down in 2022 amid allegations that he misled investors and inflated company metrics, crushing the company’s valuation. Yet for some reason the board brought him back to lead the company in 2025.
This dynamic may also explain how the co-working start-up WeWork went from a $47 billion valuation to bankruptcy, while its chief executive walked away with up to $1.7 billion — and then raised about $350 million from a leading venture capital firm, Andreessen Horowitz, for another real estate venture.
There may not be consequences for insiders in Silicon Valley or on Wall Street yet, but Mr. Musk’s ever-rising, hype-driven wealth certainly affects the rest of us. His huge political spending has given him influence over government officials, including regulators who might otherwise scrutinize his companies. His control over the Trump administration’s so-called Department of Government Efficiency crippled some government agencies.
Is it any wonder that 67 percent of Americans believe the economy is rigged to advantage the rich and the powerful?
The real question is whether this party will end. Dr. Seru, like many finance experts, says it will. “Eventually, fundamentals still matter,” he noted. But who knows when that might happen? From birtherism to A.I. deepfakes, fiction has outrun reality for years now.
