By Al Root

Wall Street is abuzz over the SpaceX IPO, which promises to set records, bring investors another trillion-dollar AI company, and make Elon Musk a trillionaire (officially).

There is no doubt that SpaceX is an amazing organization. Its pioneering use of reusable rockets, which dramatically lowered the cost of reaching space, has created the modern space economy. And it's led by Elon Musk, who, despite his critics, is a visionary leader.

Still, trillion-dollar companies are typically profitable.

"There's never been a $2 trillion market cap company that doesn't make money," says Future Fund Active ETF co-founder Gary Black. "Let alone [one] that trades at 300 times Ebitda."

Ebitda is short for earnings before interest, taxes, depreciation, and amortization.

To be sure, he is right. Today, there are eight companies approaching a $2 trillion market value: Nvidia, Alphabet, Apple, Microsoft, Amazon.com, Broadcom, Tesla, and Meta Platforms.

(Those eight are worth a combined $24 trillion.)

They generated almost $760 billion and $900 billion in Ebitda over the past 12 months from sales of $2.4 trillion, according to FactSet. The Ebitda profit margin is 38%. Leading the way is Nvidia with margins of about 65%. The group trades for about 32 times trailing net income, 25 times trailing Ebitda, and 10 times sales.

SpaceX lost about $5 billion in 2025, according to its IPO registration statement. It did generate about $6 billion in adjusted Ebitda from sales of almost $19 billion.

At a $2 trillion valuation, SpaceX would be trading for about 100 times Ebitda and 330 times sales. It doesn't have a PE ratio since there was no E.

To Black's point, high valuation is a risk for potential SpaceX investors. But there is the Musk factor. One of the multi-trillion-dollar companies is Tesla. It doesn't trade like the others. Tesla stock trades for roughly 400 times trailing net income, 130 times Ebitda, and 16 times sales. Investors historically have tended to trust Musk.

There is also a bevy of trillion-dollar or near-trillion-dollar companies that aren't profitable. There are SpaceX, OpenAI, and Anthropic.

All three are vying for AI dominance. And investors believe that all the spending on AI computing will eventually lead to earnings. AI computing is valuable. Anthropic is paying SpaceX $15 billion a year to access its data centers. Anthropic is monetizing that spend through its Claude AI tools.

Exactly how much money SpaceX and the other AI companies make is hard to predict. It better be a lot.

SpaceX does have its profitable segments. SpaceX's Starlink space-based broadband product generated 2025 adjusted Ebitda of $7.2 billion. Ebitda margins were north of 60%. The launch business generated 2025 adjusted Ebitda of $653 million.

Both of those franchises are strong. SpaceX handles more than half of global orbital launches. Starlink grew its subscriber base by more than 100% in 2025 to 10.3 million users.

What Starlink or the launch business is worth is also hard to say. For now, the market, based on IPO indications and private exchanges, says it's all worth $1.7 trillion to $2 trillion.

Time will tell if that's the right valuation.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 22, 2026 12:20 ET (16:20 GMT)