Investors best know SpaceX as a rocket-launch company, but for now, satellite communications are what pays the bills. And going forward, Elon Musk sees its biggest market opportunity in a third area: artificial intelligence.
So what exactly are investors buying?
Up until February, that answer was clear. Then SpaceX $(SPCX)$ blended its more mature rocket and telecommunications businesses with an early-stage AI company, xAI, which Morningstar's Nicolas Owens said marked when SpaceX "changed its stripes." There's a good reason for that.
"For the purposes of going public, having the AI business front and center positions this as more in line with one of the hottest investing themes ever," Owens told MarketWatch.
The company has outlined a near-term total addressable market of $5.7 trillion, attributing just $370 billion to space-enabled solutions. It chalks up another $1.6 trillion to its connectivity business. The remainder is AI-related services, such as infrastructure.
Over time, SpaceX sees its TAM jumping to $28.5 trillion - or about $3 trillion less than U.S. gross domestic product - entirely thanks to the growing potential of AI. The bulk of that comes from undefined enterprise applications, which SpaceX said will contribute to $22.7 trillion of the TAM.
David Morrison, senior market analyst at Trade Nation, told MarketWatch in emailed comments that xAI likely accounts for $1 trillion of SpaceX's targeted $1.75 trillion market valuation. SpaceX is planning to begin trading as a public company on Friday.
"That's a big bet on xAI getting a durable competitive advantage over the competition in the coming years," Morrison said, pointing to the AI business's string of losses since it was founded three years ago.
The payoff for that bet will likely take a while to be realized. Although a handful of multibillion-dollar AI computing deals may help xAI shore up its finances faster than previously expected, SpaceX needs its Starship efforts to pay off if it wishes to achieve its peak aspirations.
While SpaceX's Falcon 9 partially reusable rocket has been the space industry's workhorse for years, it does have its limitations. Those can be overcome with Starship, a mega-rocket that SpaceX said can carry more than four times as much payload to low-Earth orbit as the Falcon 9.
SpaceX has spent more than $15 billion developing Starship, which the company said could potentially slash launch costs down by as much as 99%. Pitchbook analyst Franco Granda recently told MarketWatch that SpaceX's future is "all" being enabled by the 407-foot-rocket.
"Starship is...going to revolutionize space, really. It's the first rocket design that is capable of full and rapid reusability," Musk said in a video posted this week. "Reusability is the fundamental breakthrough."
Musk wants to eventually be launching Starship more than once an hour, although for now it's still in the testing stage. Starship, which had a fiery end to its latest test, is expected to send its first payload to orbit in the second half of 2026, according to SpaceX's timeline.
Once up and running for commercial use, Starship is expected to enable SpaceX to begin launching its advanced V3 Starlink satellites and AI satellites, which are core to its AI strategy. Musk and others see AI satellites that can serve as space-based data centers providing a solution to the energy-intensive needs of hyperscalers.
Musk said this week that SpaceX will try to achieve a roughly annualized rate of 1 gigawatt per year of AI computing power in space by the end of 2027. Eventually, SpaceX wants to ramp that up to a terawatt a year, or 1,000 gigawatts.
See more: Elon Musk says SpaceX doesn't need 'magic' to put AI data centers up in space
The 'Elon model'
SpaceX's focus on AI draws comparisons to Tesla $(TSLA)$, which Musk helped found and leads as CEO.
Tesla has made an overt pivot toward AI, namely humanoid robots and autonomous vehicles, and that transformation now consumes investors' attention. The company's main generator of revenue, electric vehicles, often plays second fiddle.
SpaceX is in a similar situation, although investors aren't as dismissive of its main revenue engine: the connectivity business. That unit's potential is often touted by investors, such as the billionaire Ron Baron. It includes Starlink, which generated more than half of the company's revenue and most of its adjusted profit last year.
"This fits the Elon model of having a business that generates profit now (like Tesla cars), a business that is on the come (Tesla's Robotaxi/SpaceX data centers in space) and an unlimited TAM dream business (Tesla's Optimus/SpaceX Mars occupation)," D.A. Davidson analyst Gil Luria said in a note to clients last month.
The IPO's purpose, Luria believes, is to set up SpaceX for a merger with Tesla. For months, investors have speculated that Musk's ultimate goal is to combine his empire as he's already been tying various businesses closer together.
SpaceX and Tesla are working on the Terafab, an expensive plan to produce AI chips for everything from AI satellites to Optimus robots. Tesla has sold about $940 million worth of vehicles and energy products to SpaceX between January 2025 and April 2026. Additionally, Tesla has a stake in SpaceX.
"In theory, they could do a joint venture" or have a supplier and original-equipment-manufacturer relationship, Morningstar's Owens, who believes SpaceX stock is currently overvalued, told MarketWatch. "But at the same time, it almost would just be cleaner to bring it all together."