SpaceX Is Down 40% — How Low Can It Go?

Ed Elson is joined by Nicolas Owens to break down how SpaceX shares fell below their IPO price and where the stock might go from here. Then, Bradley Tusk returns to discuss New York’s statewide data center moratorium and whether other states might follow suit. Finally, Ed gives his take on the Treasury Department's new gold coins. Nicolas Owens is an Equity Analyst at Morningstar. Bradley Tusk is a venture capitalist, political strategist, and writer. Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 0:01Speaker 00

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• 1:44Ed Elson?

  Welcome to Prof G Markets. I'm Ed Elson. It is July 16th. Let's check in on yesterday's market vitals. The major indices rose after another inflation reading from the producer price index came in cooler than expected. Treasury yields fell. Brent crude had another volatile day as the U.S. continued to strike Iran. And finally, Apple stock hit an all time high after announcing it will integrate Alibaba's Qwen model into Apple intelligence in China. Okay. What else is happening? The largest IPO in history is officially underwater.

• 2:20Ed Elson?

  Yesterday SpaceX fell below its $135 IPO price for the first time, touching an all time low of $132.75. The stock has now dropped 40% from its peak, wiping away more than a trillion dollars in value. That downfall comes just one month after a debut that raised a record $86 billion and briefly made Elon Musk the world's first trillionaire. The new low also comes just one week after SpaceX joined the Nasdaq 100. That means that the index fund and the millions of Americans whose retirement accounts track it bought in right before a 10% decline. It also means, more importantly, my SpaceX prediction is on its way to becoming reality on June 10th. I said this.

• 3:04Ed Elson?

  Here is my prediction for what will happen tomorrow. As soon as it hits the market, SpaceX stock will immediately explode 25%. However, my other prediction is that within six months, probably sooner, SpaceX stock will be cut in half. Why? Because the valuation makes no sense whatsoever. Almost two for two. We'll see. Joining us to discuss SpaceX's decline, we're speaking with Nicolas Owens, equity analyst at Morningstar. One of the few analysts who has been bearish on this stock. Nicholas, thank you for joining us on the show. Just as a reminder for our audience, you published your SpaceX research before the IPO. You valued the company at $62 per share.

• 3:48Ed Elson?

  So even lower than where we are now, of course. Just walk us through your valuation again as a reminder.

• 3:55Speaker 06

  The $62 is the result of three scenarios. You know, a bull case, a medium case and a bear case and some probabilities that we assign to those. Only in the bull case do you get into the 130, 150, $160 range. The problem is that depends on so many things going right that we think there's only a 7% chance of that happening. So that's where you get to a weighted average fair value of 62. You know, the medium case on its own is about $71 a share. So I think we're in the same camp, if you will, thinking about havesies valuation wise.

• 4:30Ed Elson?

  Just looking at what's happened so far. So the stock, I mean, obviously it popped immediately as I thought it would. It continued to rise and now it's it's coming down. I mean, it's been pretty quick. The way this has happened, especially considering the fact that it joined the Nasdaq 100 so recently. What do you make of how quickly it has started to drop back down?

• 4:53Speaker 06

  I think it's a really good point. I think there's two kind of buckets that I would want to point out there. First of all, maybe working backwards, it's quick. I think partly because the the float is still so small, only four-ish percent of the company. But then on top of that, I think it's, and I go back and forth between thinking about the fundamentals, like what do you have to believe about AI data centers in space, et cetera? Or what the margins on that might be in 10 years? And then you you go to the the just the market, the supply and demand for the shares themselves. Right? So both of those should drive the price. So I think here you have, in the next couple of weeks, I think they're supposed to announce earnings August something, August 8th or 9th.

• 5:35Speaker 06

  And two days after that, on a whole nother 7% of the company can be sold by insiders. So that's supply. And then I wanted to comment on the Nasdaq 100 inclusion, which is, you know, notable because it was a result of some changes in their in their methodology and so forth. But I think actually not even that huge a deal in terms of demand. So if I I Googled how, what's the market cap of all the funds that track the Nasdaq 100 and something like $800 billion? Or if it's $800 billion and they're weighting it at 1%, that's $8 billion of demand that that would have been a result of of that inclusion, which does not offset.

• 6:14Speaker 06

  If you look at the market cap and even with the float, you know, the the potential supply of someone who bought it at 135 and was selling at 156 or whatever in the last, you know, couple of weeks.

• 6:27Ed Elson?

  One of the crucial things you mentioned there is the fact that we haven't even gotten to the lockup expirations yet. I mean, that was what I was kind of waiting for is as soon as people can sell, my assumption is there are a lot of people who are very rich on paper right now. As soon as those lockups expire, I assume they're going to want to sell and maybe go out and buy a boat or buy a house, whatever they want to do. That hasn't even happened yet and yet the stock is still declining. Surely that means it can only keep going down. What do you think will happen?

• 6:59Speaker 06

  I think that seems likely. My, my, I think two kind of, so I go back then to the fundamentals. What are, what are maybe some changes in what people believe about what's, you know, what drives the value of this stock? There's certainly the Starlink business, which is actually kind of the the gem, you know, right now. But you have motivated competitors making some advances in their their launch and their technology. Ironically, I think that the the economics of of this business may resemble the terrestrial telecoms business where we Morningstar would call it an efficient scale. Source of moat, which is problematic because the more players there are, the worse the economics get.

• 7:42Speaker 06

  So SpaceX is kind of king of the hill there and having a eager competitor launching a bunch of satellites looks like a capacity glut could happen. And so pricing doesn't look as good. So there's maybe some overhang even on the Starlink case. In terms of AI, there's so many assumptions you have to make to get to these upside scenarios. And the payoff there, you know, is in, let's call it decades. And and there's a couple of news items I would point to. Meta starting to rent out capacity. OpenAI probably delaying their IPO.

• 8:23Speaker 06

  Those are things that would make people question the thesis of what is the ROI on all these investments that have been made? And SpaceX today looks a lot like an infrastructure play. And and also an LLM that is not in the top ranks, shall we say? So lots to question.

• 8:42Ed Elson?

  And when you look at some of the the research that we've seen from some of the other Wall Street analysts, to be clear, 27 of the 31 analysts who cover this stock have recommended it as a buy. And the average price target is shockingly $242 per share. One analyst gave it a price target of $800 per share, which would value it at $10 trillion in market cap, which would make it by far the most valuable company in the world, like double Nvidia, double Apple. I mean, it's just nuts. What are your reactions to some of the other price targets that we've seen, given the fact that you rate it at 62?

• 9:20Speaker 06

  I would sort of like to go back to first principles and I would say things like the market works on disagreement. And it's really good that investors have, let's say, different sources of information about what, what do you have to believe to buy this or that version of of what the stock might be worth? I think there's also a methodological difference. I have a discounted cash flow model. We have forecasts out to 2045. We're discounting those today. So we're saying these shares are fundamentally worth $62 today. Again, probability weighted. A lot of those analyses that you're referring to, they're doing things like, oh, let's get to 2027, 2028, when they might be making money a little bit. And then we're going to put a 100x multiple or something on that number. And and they're doing some of the parts, you know, with Starlink and AI and so forth.

• 10:05Speaker 06

  But that is a different methodology that gets you. And and again, I think when you're doing a multiple, you're baking in assumptions that are not necessarily being stripped out. You're making growth rate assumptions and discount rate assumptions that we always are very explicit about at Morningstar. So I think that's, that's as much of a compare and contrast as I'd be comfortable doing.

• 10:26Ed Elson?

  Fair enough. It's a polite polite way of putting it, just looking ahead for the rest of the year. I mean, we've got the supply of the new shares coming down the pipeline. We've got, I mean, as you mentioned, right after the the Q2 earnings report, lots more supply because of the lockup expirations. But then it's going to continue for the rest of the year. Lots more investors will be able to sell. Given all the information at our disposal, do you have any thoughts on how the stock will perform over the course of the year?

• 10:56Speaker 06

  Honestly, I think it could go either way and I'll tell you why. So with everything we've said, right, there, there's certainly some, some, a lot of items in the, you know, in the negative column in terms of supply of shares and small changes in people's sentiment can make a bigger move. Again, given the smaller float. You could say a positive argument is the float will actually increase with each of these with each of these lockups expiring. And depending on what investors appetite is, you know, the price could find a new a new direction. And and I'll say too, I expect the quarterly report to be glorious. You know, we have, we have pretty good growth rates for even for 2026. And I think if they did it kind of according to what I think of as the classical IPO playbook,

• 11:40Speaker 06

  they've got two quarters of numbers pretty much in the bag that they will be happy to share. Right. And you, I'm looking mostly at those, those rental agreements with, with Anthropic and Google and the other one that are pretty nice chunks of revenue at low marginal cost. They're still spending a lot, et cetera. But anyway, I, I think you can, you'll see some nice comps, you know, and then it might be a, people might be more comfortable thinking, oh, you know, AI might be whatever cash flow neutral in 2033 or whatever the story ends up being. So I'm not, I'm not, I'm not excluding the possibility that there will be some good

• 12:20Speaker 06

  news there and it wouldn't take much in terms of, let's say, the collective, you know, appetite. If the story turns positive again, so I wouldn't sit here and say it's totally, you know, gonna crater. That said, there has to be more demand than supply for the stock to go up. It's again, first principles.

• 12:39Ed Elson?

  All right. Nicholas Owens, equity analyst at Morningstar, very respectfully bearish, which we always appreciate. Thanks again for joining us, Nicholas.

• 12:51Speaker 06

  Thanks so much.

• 12:54Ed Elson?

  After the break, New York hits pause on data centers. And for even more markets insights, you can subscribe to my weekly newsletter, Simply Put, at simplyput.profgmedia.com.

• 13:06Speaker 00

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• 14:47Ed Elson?

  We're back with Prof G Markets. New York just issued the country's first statewide data center moratorium. Governor Kathy Hochul signed an executive order on Tuesday that pauses state permits for the largest AI data centers for one year. During that pause, the state will write rules to protect the environment, the grid, and ratepayers. The move comes amid growing opposition to data centers nationwide. A recent Gallup poll found that seven in 10 Americans oppose constructing data centers in their own community and local resistance has already delayed or blocked nearly $130 billion worth of projects in the first quarter of 2026. The big question now is, will other states follow New York's lead?

• 15:30Ed Elson?

  Joining us to discuss this, we're speaking with Bradley Tusk, venture capitalist, political strategist and writer. Bradley, good to see you. Thank you for joining us. That is my first question. Is this moratorium the first of many?

• 15:43Speaker 10

  Yes. Now, I don't think it's sort of an absolute yes, but let's work off the basic thesis, which pretty much defines everything that I do, which is that every policy output is the result of a political input. Every politician makes every decision solely based on winning the next election or nothing else. If you assume that's the case, and 34 years in politics has taught me that that's the case, then you look at the unpopularity of AI across the board, then of course politicians are going to pass bills and regulations and sign executive orders that come off as anti-AI. And we've seen lots of stuff happen in this past legislative session, which wrapped up about a month ago, kind of across the country, where new laws regulating chatbots, new laws

• 16:27Speaker 10

  regulating AI use in insurance, new laws regulating AI use in healthcare, in hiring, data centers. So there's a lot of areas of it because politicians want to seem responsive to the voters. And data centers are particularly controversial. However, I also do think when you read the governor's executive order, it does kind of point towards a resolution of all of this that I think is pretty doable. And, and I will say that Kathy Hochul, for a Democrat, is really pro-business. So when she did this, that's an indication of one, how powerful this issue is. She is also up for reelection this fall, and she's not stupid by any means politically either.

• 17:08Speaker 10

  But I think that she did sort of lay some breadcrumbs as to how this all works out. And to me, really, there are kind of three things that if data centers say, hey, we can do these things, most of this is pretty resolvable. So one is energy. And the, the thing that made that a data center so unpopular is that initially the ones in Northern Virginia, in Georgia, were just plugging into the grid. And by doing that, because of their vast energy consumption, people's electricity bills were going up 30, 40%. And they're saying, why am I subsidizing Sam Altman? Why am I subsidizing Anthropic? And of course, they shouldn't do that. If data centers are required to either bring their own power or pay for their own costs

• 17:51Speaker 10

  and not impose those negative externalities on anyone else, that solves a lot of it. So that's number one. Number two is water usage. And even though it doesn't get as much attention, data centers, when you have a system that big, requires a lot of water for cooling, there are things called a closed loop system that are really not that hard to install. And a data center can be built in a way that it brings in its own water, it circulates it, refrigerates it, it meets its own needs, and it's not drawing from the water utility itself, or the risk of it then putting polluted water back into it, like you just saw with the metadata center recently. And the third would be a relationship with the data center itself is a benefit to communities.

• 18:34Speaker 10

  One challenge that data centers have is they don't create a lot of jobs. They create some construction jobs, so some of the building trades unions like them, and that's great. But long-term, permanent jobs, it's really not all that many. So if you're going to be in a community, how can you help it? Are you going to help pay for energy grid improvements? Could you pay for some sort of property tax rebate? Could you pay for libraries and parks? And I think the good data center builders and hyperscalers are open to these ideas. And so I do think there's a, a solution here, but it's not just going to be, hey, AI is a national security issue, so we're just going to put these wherever we want and everyone just has to suck up and bear the cost of it.

• 19:14Ed Elson?

  Something I can't quite tell from this legislation is how genuine it is. I think it's certainly an element of this, which is like she wants, she's running for reelection. It is more popular to be anti-AI today, just based on the numbers, which makes me think, okay, maybe, I mean, it's unclear if this is actually an anti-AI policy or if this is just pressing pause, pretending to be anti-AI policy, and then it's actually something else. I mean, where is it?

• 19:47Speaker 10

  I think you may be giving politicians too much credit in your question itself there, right? Which is, you're almost assuming there's substance, there's politics, and where's the distinction? I don't think there is a distinction, right? It's politics and then substance gets impacted by the politics of it. But I think the reason that the governor did the executive order as opposed to signing the legislation was to sort of not further the notion that data centers in and of itself are a bad thing, because we do need data centers, right? You can't have a country that, whose economy is so reliant on AI, whose international security kind of rates around AI with China, and then not have the ability to actually power AI. So clearly, we need data centers, but needing them and then imposing costs on voters and

• 20:30Speaker 10

  consumers are two different things, and I think that they are reconcilable. So I think what Governor Hochul was trying to do is not in any way imperil her reelection bid, because she's a politician first, and I don't want to pretend that she's not. But within the realm of politicians, because I do work with her enough to know her reasonably well, she is pretty pro-business, she is pretty reasonable, she's pretty moderate, she's the furthest thing from a DSA-type Democrat. And so I think she was trying to split the baby a little bit.

• 20:57Ed Elson?

  Where do you think this goes from here in terms of data center regulation? Because if she's the pro-business governor who is putting a moratorium on data centers, it makes me think that we're going to see even stricter anti-data center regulation going forward.

• 21:13Speaker 10

  So earlier this year, Vermont and Maine did both pass moratoriums that were vetoed by their governors. Now, the governor of Vermont happens to be a Republican, the governor of Maine is Janet Mills, who's a pretty moderate Democrat like Hochul. But in Oregon, a Washington state, are we going to start to see, you know, the, the most left-wing states potentially do this? You know, absolutely. But, but here's one thing that's really important to understand about the politics and regulation of AI. It's really not that partisan, meaning that when you look at the different types of AI regulation and legislation that have been enacted over the past year. It's not just the left. It's red states and it's blue states. It's rural states and it's urban states. And so fundamentally, the polling and unpopularity of AI kind

• 21:58Speaker 10

  of cuts across all of the normal partisan lines and ideological spectrums and everything else. And so I think politicians on all sides are certainly concerned about this.

• 22:08Ed Elson?

  Final question. A very important politician bashed this decision. President Trump said, quote, "One of the biggest driving forces in the future for jobs are data centers. New York State has made a terrible decision." So he has come out publicly pro data centers. What does that do to his political standing?

• 22:26Speaker 10

  I mean, I'm not quite sure what he means by one of the most important jobs because data centers themselves don't create a lot of jobs. I assume what he means is that the AI economy powered by data centers needs data centers, and he's right about that. And he is the one that put together the whole Stargate program that was OpenAI committing $14.4 trillion in CapEx for data centers. So I guess he feels some ownership of it. And then in terms of his own personal finances, you never know with this guy one way or another. But, you know, even he clearly has started to lean into the regulation of AI. He had an executive order a little over a month ago that asked the hyperscalers to give them, beating the US government, advanced copies of frontier, new frontier models like Methos

• 23:10Speaker 10

  from Claude before they're publicly released. And so even Trump, I think, understands which way the wind is blowing. And so to a certain extent, he's probably trying to have his cake and ate it too. But also, it's quite possible he doesn't even really understand what data centers are. And someone said something to him and then he fired off a post and didn't even realize what it was.

• 23:29Ed Elson?

  Giving him too much credit to say there's any strategy to it.

• 23:34Speaker 10

  Yeah, I think the recurring theme of this interview has been you keep giving politicians way too much credit.

• 23:40Ed Elson?

  Okay, I'll stop doing that going forward. Bradley Tusk, his avenger capitalist, political strategist and writer. Bradley, really appreciate your time. Thank you.

• 23:52Speaker 10

  Happy to come on. Thanks, Ed.

• 23:58Ed Elson?

  Exciting news from the Treasury Department. The United States will start producing new $1 gold coins emblazoned with the face of President Donald Trump. That makes Trump the first sitting US president to appear on our national currency, but he will join a long line of other international leaders who featured on their currency while in office, including but not limited to Saddam Hussein, Gaddafi, and Mao Zedong. So, you know, he's in good company. According to Treasury Secretary Scott Besant, the Trumpified coin, quote, "celebrates the strength of American values." We're not sure what values he's referring

• 24:41Ed Elson?

  to specifically, but they may include idolatry, greed, corruption, hubris. After all, these are the hallmarks of any self-idealizing political leader, especially ones who have literally flirted with the label of dictator. And so it does appear that we are approaching, I don't know, the end times. And it's not just the gold coins. It is not just the gold statues. It's also the billions of dollars that were stolen from households via a literal Ponzi scheme called Trump coin. It's also the dozens of children who were sexually abused by his confident Jeffrey Epstein and all of the other young women who were clearly

• 25:25Ed Elson?

  exploited, if not directly by Trump, then certainly indirectly through his social circles. It's also the fact that all of this was covered up by an administration that has systematically rewarded sycophancy and punished integrity. And if you don't believe me on that, just search up the name Margaret Ryan and you will understand what I mean. It's also the $5.6 million that he just paid this week as settlement in a lawsuit that literally found him liable of sexual abuse by a jury of his peers. It's the bombing of other nations with no real contingency plan. It's the accidentally murdering 120 children in a drone strike and then never actually acknowledging why or how that happened. It's the pardoning criminals

• 26:07Ed Elson?

  and the threatening allies and then suggesting that we should invade them. It's a lot. And so what better way to commemorate this individual than to enshrine him on the legal tender of the United States? Let's put him in the ranks of George Washington and Benjamin Franklin and Abraham Lincoln. Now, you might say that I have Trump derangement syndrome. You might say I'm, I don't know, brainwashed by the media. But anyone with two eyes, a brain, and a basic understanding of history knows exactly what's happening here. And that is,

• 26:47Ed Elson?

  this is what third world countries do. And if you cannot acknowledge that, or you feel a need to justify it, or explain it away, or downplay it by any measure, then, dare I say it, you have been brainwashed yourself. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Kristin Adonahiu, and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson, and tune in tomorrow for our conversation with Mike Novogratz.

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