Elon Musk has been transforming science fiction into reality for nearly two decades, generating substantial wealth for investors and gaining considerable faith from Wall Street. Beyond his ventures in rockets and electric vehicles, Musk’s companies are impacting financial markets by encouraging analysts to use unconventional valuation methods, with one academic referring to this phenomenon as “optionalities.”
Musk’s forward-looking vision has led analysts to categorize Tesla Inc. as more of a robotics company than a traditional automaker. This perspective has set the stage for potential valuations of SpaceX at $2 trillion ahead of its anticipated public offering in the coming weeks.
While critics cite high valuations as a red flag, many investors have opted to embrace SpaceX’s IPO, believing the risks of non-participation outweigh those of investment. Aswath Damodaran, a New York University finance professor renowned for his analytical prowess, is skeptical about the $2 trillion target. Although he concedes that SpaceX has considerable potential, he suggests a more modest valuation closer to $1 trillion.
“The optionality is richer with SpaceX than Tesla right now,” Damodaran said in an interview. “Right now SpaceX is so far ahead of the competition that it’s in better shape than Tesla to deliver on the optionality.”
The valuation premium that analysts ascribe to Tesla’s riskier ventures stems from Musk’s successful track record. For SpaceX to validate its pursuit of a $2 trillion valuation, any financial model is likely to incorporate this “Musk premium.”
Damodaran has acknowledged the significant achievements of both Tesla and SpaceX: “You have to give him credit because he created two companies that are truly technological marvels.”
Tesla’s Upside
Tesla has long traded at a valuation that surpasses even its most highly valued peers in the tech sector, holding a forward price-to-earnings ratio more than five times that of Apple Inc. Analysts express little long-term optimism regarding Tesla’s automotive business and largely disregard its plans to invest over $25 billion in the current year. Instead, they focus on emerging technologies such as artificial intelligence, autonomous vehicles, and the long-anticipated robot project, Optimus, which has been in development for over four years.
More than two dozen analysts with buy ratings on Tesla anticipate revenue from long-overdue products like Cybercab and Optimus, despite modest growth in car sales. Tesla advocates expect the company to release Robotaxis and humanoid robots, with a survey of sell-side analyst notes indicating that both offerings constitute over half of their sum-of-the-parts valuations. Many analysts appear willing to envision these projects generating significant profits in the future.
For instance, Piper Sandler analyst Alexander Potter referred to vehicle sales as a “minor long-term revenue source,” predicting that car sales will peak within five years, while Robotaxi rides and full self-driving services will increasingly dominate sales in the decades ahead.
Conversely, skeptics express concerns about the lofty costs associated with developing physical AI. UBS analyst Joseph Spak cautioned that the $25 billion spending planned for this year marks only the initial phase. He also noted Musk’s more tempered tone during the April earnings call regarding the launch of Robotaxi and Optimus.
Valuing SpaceX’s ambitious projects is even more challenging. In addition to its government contracts for launching rockets and Starlink’s satellite internet service, much of the projected $2 trillion value hinges on Musk’s aspirations, such as establishing data centers in space, building a lunar base, and eventually colonizing Mars. This presents a virtually limitless theoretical addressable market for optimistic investors.
Tesla’s stock has surged nearly 3,000 percent over the past decade, enriching those who believed in Musk’s vision and fueling excitement around SpaceX’s offering.
“A lot of analysts have already pre-decided that they’re going to buy SpaceX because you can’t afford to not be in, that’s the way they see it,” said Damodaran. “The FOMO is strong because they’ve seen what happens when they miss out.”
Ark Investment Management, a current SpaceX investor and long-time Tesla holder, stated that a $1.75 trillion valuation is “grounded in a plausible trajectory” for the company’s core businesses in rocketry and AI.
“Musk’s goals are ambitious by any historical standard, and SpaceX has repeatedly demonstrated the ability to compress timelines that skeptics once assumed,” the firm noted on April 20. “Though not a guarantee, we believe that track record is a meaningful data point.”
Skeptics Versus Musk
Despite Musk’s track record of defying skeptics and attracting long-term investors, critics remain unconvinced, arguing that the projections do not align with reality.
Michael O’Rourke, Chief Market Strategist at Jonestrading Institutional Services, who has decades of experience on Wall Street, described the sales pitch as difficult to justify. “You’re talking about 100-times revenue,” he remarked regarding SpaceX’s anticipated valuation in light of last year’s reported sales of approximately $20 billion.
Even if the concept of space-based data centers becomes viable, investors lack evidence suggesting they would be more economical than terrestrial facilities.
“You’re paying for success that has not been earned yet, and it’s a situation filled with hype, regardless of whether it’s retail enthusiasm. It doesn’t relate to investing in a company that is valued based on generating profitable returns,” he said.
A crucial aspect remains whether individual investors who are loyal to Musk will significantly participate in the IPO and subsequent trading days. SpaceX plans to allocate up to 30 percent of its shares to retail investors, which could amount to $22.5 billion in a $75 billion offering. This figure exceeds the total net buying observed from individual investors in Tesla over the past year, according to Vanda data as of May 14.
O’Rourke cautioned that SpaceX’s IPO might signal the end of the favorable market conditions. “These are things you see near market tops and in bubbles,” he stated. “When we look back a year from now, I think it’ll be a key signal.”
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Published on May 18, 2026.
