The SpaceX IPO Has Wall Street Debating Whether the AI Boom Is a Bubble. Both Sides Have a Point.

On June 12, SpaceX (NASDAQ: SPCX) completed the largest initial public offering (IPO) in history, raising about $75 billion at a valuation of about $1.75 trillion -- more than double the size of any stock market debut before it. By the closing bell, the stock had jumped 19%, lifting the rocket-and-satellite company's value above $2 trillion.

SpaceX went public in the middle of a wave of artificial intelligence (AI) spending unlike anything the market has seen, with the four biggest technology companies alone on track to pour about $725 billion into capital expenditures (much of it on data centers and chips this year) -- up about 77% from last year. To some investors, a record listing landing on top of all that spending looks like the kind of enthusiasm that shows up near market tops. To others, it's a rational response to seemingly insatiable demand that remains largely unmet.

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So, is this the top? Here's a look at both arguments.

The bear case

Bursts of giant, money-losing IPOs have often clustered near market peaks, and SpaceX fits the profile. The company priced at more than 90 times its 2025 revenue while posting a $4.9 billion net loss for the year -- a loss driven largely by the AI unit, the former xAI, that Elon Musk folded into the company.

Yet demand for the IPO was heavy enough that the offering was oversubscribed several times over, with retail investors alone reportedly submitting more than $70 billion in orders.

The backdrop looks stretched, too.

The S&P 500's cyclically adjusted price-to-earnings ratio sits near 40 -- a level it has touched only once before, during the dot-com bubble.

Then there's the spending. The four biggest AI spenders -- Amazon (NASDAQ: AMZN), Microsoft, Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Meta Platforms -- are spending so heavily that their free cash flow has plummeted. Indeed, Amazon's trailing free cash flow has fallen about 95%, to $1.2 billion, and its 2026 capital expenditures of about $200 billion look poised to outrun its operating cash flow, turning free cash flow negative for the year. To keep building, the group has leaned heavily on the bond market, and Alphabet recently announced a massive $85 billion equity raise.

Meanwhile, the payoff remains hard to find. A widely cited MIT study found that about 95% of corporate generative-AI pilots have yet to produce a measurable return, and in PwC's latest global survey, 56% of CEOs said they were getting essentially nothing from their AI efforts so far.