Watch Before Friday: Most Investors Are Getting the SpaceX IPO Completely Wrong

Key Concepts

• Market Liquidity: The total volume of capital flowing through the stock market daily, which dwarfs even the largest IPOs.
• Anchoring Bias: A psychological phenomenon where investors rely too heavily on past data or "normal" price points, leading to misjudgments of current market scale.
• Total Addressable Market (TAM): The total revenue opportunity available for a product or service; SpaceX claims a $28.5 trillion TAM, heavily weighted toward AI.
• Capex vs. Revenue Phase: The transition of the AI industry from infrastructure building (Capex) to selling enterprise solutions (Revenue).
• Blow-off Top: A chart pattern that shows a steep, rapid increase in price and trading volume, followed by a sharp decline, often signaling the end of a market cycle.
• Lost Decade: A prolonged period of stagnant market returns following the bursting of a major speculative bubble.

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1. The SpaceX IPO: Mythbusting Market Impact

Brett Eversol argues that the hype surrounding the SpaceX IPO—projected to raise $75–$86 billion—is largely misplaced.

• Scale Perspective: While the IPO is historically large, it is negligible compared to the daily trading volume of the NASDAQ (~$500 billion) and the NYSE (~$600 billion).
• Market Absorption: The market is currently "swimming with capital," evidenced by recent private funding rounds like OpenAI’s $122 billion and Anthropic’s $65 billion. These figures demonstrate that the financial system can easily absorb the SpaceX offering without causing systemic shockwaves.
• Index Inclusion: Contrary to fears that SpaceX will force passive investors and 401ks to buy in immediately, the S&P 500 has strict profitability and 12-month seasoning requirements, meaning SpaceX will not be included in the index for at least a year.

2. Investment Strategy: Retail Perspective

Eversol advises a cautious, patient approach for retail investors:

• Historical Precedent: He compares the current situation to Facebook’s 2012 IPO. Despite being a strong company, Facebook’s stock fell 50% in the first six months as it struggled to monetize mobile users.
• Valuation Concerns: SpaceX is a massive company with relatively low current revenue. Eversol suggests that waiting for the initial "IPO pop" to settle could allow investors to enter at a 30–40% discount within the next 12 months.

3. The AI Growth Cycle: A Three-Phase Framework

Eversol categorizes the AI boom into three distinct phases to explain why the market still has "runway":

1. Phase 1: Infrastructure Buildout (Capex): The last three years were defined by hyperscalers spending hundreds of billions on data centers. This phase is ongoing, with projected annual data center spending reaching $1 trillion by 2028.
2. Phase 2: Enterprise Sales: We are currently in a tipping point where companies like Anthropic are moving from development to selling AI solutions. Anthropic’s revenue growth from $4.5 billion to $47 billion in six months serves as evidence of this shift.
3. Phase 3: Return on Investment (ROI): The final phase, which has not yet been fully realized, will be when businesses prove that AI spending leads to tangible cost savings or increased revenue. This phase will likely trigger the "mania" stage of the bubble.

4. The "Meltup" and the Risk of a Lost Decade

Eversol presents a sobering outlook on the long-term market cycle:

• The Pattern: History shows that after roughly eight years of strong performance, innovation-driven cycles (like the 1990s dot-com boom) end in a "blow-off top."
• The Warning: Once the AI bubble reaches its peak, the market may enter a "lost decade" where stocks provide little to no return for 10–15 years.
• Actionable Insight: Investors should participate in the current AI boom to capture gains but must remain disciplined about taking profits, as the subsequent correction will be a "very painful long-term period."

5. Notable Quotes

• "We live in a world that is just completely inundated with information... you have to figure out the 5% of things that really matter so that you can focus on those and ignore the 95% of things that are marginal."
• "I think we're in the fourth inning. I think there's still a lot of runway for the story."
• "Bubbles can last a lot longer than most people think, and they can go a lot higher than most people realize."

Synthesis

The SpaceX IPO is a distraction from the broader market reality. The true story is the rapid evolution of the AI sector, which is currently transitioning from a capital-intensive infrastructure phase to a revenue-generating enterprise phase. While the AI boom has significant room to grow, investors must recognize that they are in the late stages of a cycle. The goal is to capitalize on the remaining "meltup" while preparing for the inevitable, long-term stagnation that historically follows such speculative bubbles.