According to calculations, if investors want to achieve an annual return of about 10%, SpaceX needs to achieve $1.1 trillion in revenue by 2035.

Written by: Long Yue

Source: Wall Street Watch

The news of SpaceX's upcoming IPO continues to develop. According to plans, this space and AI company under Musk will debut on Nasdaq on June 12, with a market value of about $1.75 trillion, making it the highest-valued IPO in history.

But behind this number lies an extremely harsh mathematical problem.

According to a June 6 report by Fortune magazine, David Trainer, CEO of research firm New Constructs, conducted a set of calculations using discounted cash flow (DCF) models: if investors hope to achieve about 10% annual returns over the next decade—note that this is already a quite conservative expectation—then SpaceX's revenue must reach $1.1 trillion by 2035.

What does $1.1 trillion mean? Currently, the highest-revenue company in the U.S. is Amazon, which has reported sales of $742 billion over the past four quarters. SpaceX needs to exceed this number by nearly 50%.

And what is SpaceX's current revenue? By 2025, it is only $18.7 billion, with a loss of $4.9 billion.

From $18.7 billion to $1.1 trillion, the increase is about 600 times, with only a ten-year window.

Growth of 50% per year for ten consecutive years

To achieve this growth curve, SpaceX needs to maintain an average annual revenue growth rate of about 50% for ten consecutive years.

How difficult is this? A comparison can be made.

Nvidia is one of the fastest-growing tech companies in recent years. From 2024 to 2025, Nvidia will add about $85 billion in annual revenue, which has already amazed the market.

But according to the above calculation path, SpaceX will need to add about $360 billion in revenue in the last year (from 2034 to 2035)—more than four times Nvidia's increment that year.

Fortune magazine points out that this annual increment is equivalent to the total revenue increment of Amazon over the past six years.

Trainer directly pointed out in his analysis: this rate of growth has no historical precedent.

What $1.1 trillion means: equivalent to 2.4% of U.S. GDP

Let’s understand the magnitude of this number from another dimension.

The U.S. Congressional Budget Office (CBO) projects that U.S. GDP will be about $46.7 trillion by 2035. If SpaceX's revenue reaches $1.1 trillion at that time, it will account for 2.4% of U.S. GDP.

What does this mean?

According to Fortune's calculations, by then, SpaceX's revenue scale will be equivalent to 1.5 times the entire U.S. utility industry, 55% of the entertainment industry, and nearly three-quarters of the entire U.S. transportation industry, which includes aviation, railroads, trucking, and freight logistics—many giants like Delta Airlines, CSX, and FedEx are part of this latter group.

Trainer's judgment is: a large market can indeed support significant growth, but it will also attract a lot of competition. Alphabet, Microsoft, Nvidia, OpenAI, and others are all competing for shares in the AI market, "it is impossible for everyone to take away a few percentage points of GDP."

SpaceX's S-1 prospectus mentions that its achievable AI market size is close to $30 trillion. But the larger the market, the more competitors there are, and ultimately the share each company can secure is often far less than expected.

The core contradiction of valuation logic

There is a structural issue worth noting here.

The 10% annual return expectation set in Trainer's model is already very conservative. Generally, investors demand a higher return to compensate for risks associated with high-risk, high-uncertainty growth stocks.

In other words, if a more reasonable risk premium is used to reset return expectations, the revenue target that SpaceX needs to meet will only be higher, not lower.

The conclusion of Fortune magazine is: SpaceX is not only the largest and most highly anticipated IPO in history but also "the most expensive in terms of pricing so far."