Human life beyond the Earth and even in other solar systems, supported by powerful supercomputers capable of answering humanity's biggest questions. It sounds like Elon Musk's plans for SpaceX, but it's actually the plot of Isaac Asimov's famous short story, 'The Last Question', which came out 70 years ago, in 1956.
Asimov's story starts in 2061, when humans are already living in space and a supercomputer called Multivac performs the complex work that has enabled humanity to become an interplanetary species. Two of Multivac's minders decide to ask Multivac if the expansion of the universe can ever be reversed (this is a reference to the second law of thermodynamics, which states that the total entropy of the universe increases over time). Multivac responds that there is too little data to provide an answer.
The short story plays out over episodes spread across billions of years (even as the universe continues to expand), with humans of the time posing the same question to more advanced versions of Multivac, each time receiving the same answer. The story ends with the heat death of the universe, when the supercomputer answers the question for the last time (no spoiler alert here; you'll have to read Asimov's short story yourself).
Multi-planetary ambitions
It's likely that SpaceX founder Elon Musk has read 'The Last Question' and may even have been partly inspired by it. SpaceX's stated mission is to ‘make life multi-planetary’ and to extend human consciousness beyond Earth, a goal repeated throughout its prospectus.
The multi-planetary metaphor seems apt when considering the scale of SpaceX's initial public offering (IPO), the largest in history. SpaceX raised about $75 billion, valuing the business at $1.8 trillion, and making founder Musk the world's first trillionaire. It also entered the market at a time of heightened enthusiasm, alongside other ‘mega IPOs’ including OpenAI and Anthropic, both of which have signalled their intentions to come to market.
At the time of writing (its Nasdaq debut was on 12 June), SpaceX was still above its $135 IPO price, trading at $156 on 23 June, but it was well off the $225 intraday high on 16 June.
The firm has been busy since its market debut, securing a $60 billion all-share acquisition of Cursor, an AI-powered coding assistant, and placing $25 billion in the bond market, a move designed to term out its bridge-loan exposure.
Inside the rocket – SpaceX's main value drivers
SpaceX has three (quite distinct) divisions: launch services, satellite connectivity (Starlink) and artificial intelligence infrastructure.
The launch division is the technological backbone and primary competitive advantage. SpaceX has transformed the economics of space travel, reducing the cost of launching payloads by up to 95% and accounting for approximately 80% of global mass sent into orbit in recent years. It's widely regarded as unmatched in both the frequency of launches and their cost efficiency.
Starlink, the satellite connectivity arm, is its most profitable segment, with rapid subscriber growth and margins of over 30%. With nearly 10,000 satellites already in orbit, Musk's ambition is to expand this to 100,000 – a number that tells us a lot not just about the extent of the opportunity but also about the capital investment required.
The third division, AI and data infrastructure, is both speculative and meaningful for determining the business's success. Historically loss-making, this segment looks to be on the cusp of a dramatic revenue surge following compute agreements with companies such as Google and Anthropic, potentially generating over $25 billion annually. The acquisition of Cursor will likely be critical in this area.
Longer term, SpaceX wants to deploy data centres in space, bypassing such terrestrial constraints such as regulation, energy costs and opposition by communities to having data centres nearby.
Expanding universe, expanding capex requirements?
SpaceX has accumulated losses of $41 billion and is burning through significant cash, particularly in its AI division, with negative free cash flow of about $20 billion. And to maintain and scale its operations, it will likely require massive capital expenditure for the foreseeable future.
Being capital hungry is not a bad thing in itself, but it does raise questions about valuation. Based on conventional metrics such as enterprise value-to-sales, SpaceX is already one of the most expensive stocks globally, with a trailing price-to-sales ratio over 100.
The valuation highlights broader risks. There's been a sharp rise in share issuance by US firms of late, suggesting a trend of raising as much equity capital as possible while sentiment is favourable. Can this trend last long enough to meet the capex needs of companies like SpaceX? And if it does, will the demand for capital by SpaceX and others drive up the cost of funding for all? Finally, SpaceX has a small free float (the percentage of its shares that are not 'locked up' and available for trading), meaning the share price is likely to be volatile, responding to news flow with big moves either up or down.
Watch the video for the pre-IPO overview of SpaceX by David Smith, equity analyst at Investec Wealth & Investment International
The Musk factor
Governance is another area of concern. Thanks to the implementation of specific control structures (including super-voting shares that give Musk 85% voting control, board and CEO controls, and legal protections provided by the state of Texas that limit shareholder lawsuits), Musk retains almost unfettered control, meaning that minority investors will have limited recourse on strategic decisions, a clear departure from standard governance best practice.
There's also a great deal riding on Musk himself. While Musk has a substantial following, particularly among retail investors, the question may be asked: what would happen to SpaceX should anything happen to him? As it is, he is arguably already overextended, given his commitments to Tesla, Neuralink and The Boring Company.
Index issues
Nasdaq recently created a fast-track path for mega IPOs to be included in the Nasdaq 100. This will allow SpaceX to enter the Nasdaq 100 after only 15 days of trading, instead of the usual three months.
SpaceX's inclusion would therefore trigger forced buying of the stock by index-tracking funds, particularly exchange-traded funds that track the Nasdaq 100 or relevant sector indices. To rebalance, these funds would have to sell existing constituents of the indices they track. At the same time, short sellers may be forced to unwind their short positions, amplifying upward price pressure on SpaceX's shares. The result could be a market driven by flows rather than fundamentals. Markets will therefore be keenly watching developments on this front in the coming weeks.
Answering the last question
The 'last question' here has little to do with the second law of thermodynamics and everything to do with whether one buys into Musk's vision and his ability to fulfil his ambitions. The risks are clear – but so is the opportunity set.
*I am grateful to David Smith, equity analyst at Investec Wealth & Investment International, for his insights on SpaceX and its valuation, as well as to Barry Shamley, portfolio manager, for his input into the impact of the SpaceX IPO on market indices.