Elon Musk's SpaceX has shed roughly 22 per cent of its value from its post-listing peak, with shares falling nearly 7 per cent on the company's first day of inclusion in the Nasdaq index — a moment that had been widely expected to trigger a surge of forced buying by index funds. Instead, the company's market capitalisation slipped below $US2 trillion, down from a high of more than $US2.5 trillion ($3.6 trillion) just weeks earlier.
Index inclusion fails to deliver the expected boost
When SpaceX made its stock market debut, investor appetite was extraordinary. The company's valuation soared on the strength of ambitious, largely unproven prospects — among them the idea of data centres operating in space and the eventual colonisation of Mars. At its second-day peak, the market was pricing in possibilities that exist, for now, only as ambitions.
The widely anticipated wave of index fund buying that typically accompanies Nasdaq inclusion has so far failed to appear, leaving the share price exposed. Even a volley of bullish research from six prominent Wall Street investment banks did little to arrest the decline. One major bank's most optimistic scenario placed a price target of $US600 per share, implying a market capitalisation exceeding $US8 trillion — a figure that now looks increasingly detached from current market sentiment.
Debt markets signal growing stress
The pressure is not confined to SpaceX's equity. In debt markets, the spreads on the company's $US25 billion capital raising have widened significantly. Bonds initially priced at 1.4 percentage points above US Treasuries are now trading at a spread of 1.65 percentage points — meaning debt carrying an investment-grade rating is effectively being priced as though it were junk.
SpaceX is not alone in facing a cooler reception. A separate $US25 billion bond issue by Amazon attracted roughly half the investor interest of a comparable deal struck in March, and its pricing dragged down values across other AI-related debt instruments. It is a clear sign, analysts suggest, that the market for AI-linked debt is becoming saturated.
Broader AI market fatigue sets in
The enthusiasm that carried technology and AI-related stocks to extraordinary heights is showing signs of exhaustion. The so-called "Magnificent Seven" group of mega-cap technology stocks has fallen 6.5 per cent from recent highs in May, despite a partial recovery last month. The PHLX Semiconductor Sector Index has dropped 16 per cent in a fortnight, giving back a portion of a remarkable 105 per cent AI-driven rally earlier in the year.
The mood shift reflects deepening concern that a four-year bull run in AI stocks may have carried valuations into bubble territory. For companies whose share prices are built almost entirely on the promise of future earnings — rather than current profitability — continued access to cheap capital is not merely helpful; it is existential. The rate of AI investment spending has consistently outpaced revenue growth, meaning these companies must keep raising funds at favourable terms simply to stay competitive.
What it means for upcoming AI floats
The timing is significant for other companies eyeing public markets. OpenAI and Anthropic — both valued at under $US200 billion in fundraising rounds last year — had been openly discussing trillion-dollar initial public offerings on the back of SpaceX's spectacular debut. Those plans are now being quietly revised. OpenAI is understood to be considering a float as far out as next year, and Anthropic is widely expected to be reconsidering its own timeline.
The concern is structural. Pure-play AI companies must continually raise equity and debt to fund escalating computing and infrastructure costs. If valuations stall or market access tightens, the capital required to keep pace with larger, more diversified rivals may simply not be available — with potential consequences that extend well beyond the technology sector and into the broader economy, particularly in the United States.
For investors watching how sentiment shifts in a falling market, the SpaceX experience offers a pointed lesson: even the most celebrated listings are not immune to the gravitational pull of reality.
