Morgan Stanley: If SpaceX Drops to $100, It Means Its AI Business Is Valued at Zero

Morgan Stanley analysts stated that SpaceX's stock price has recently declined, approaching a level that means investors have assigned almost no value to its artificial intelligence business.

After completing a record-breaking $86 billion IPO in mid-June, SpaceX's performance in public trading has been rather volatile. In the initial trading phase, SpaceX shares surged nearly 50% within the first three trading days but then continued to fall back. On Thursday, the lowest price touched $110.85, down 18% from the IPO issue price, and closed at $115.07 on Friday.

Morgan Stanley analyst Adam Jonas wrote in a report to clients on Friday:

“We believe there is a significant disconnect between the increasingly pessimistic sentiment of investors and the company’s fundamentals, creating an attractive buying opportunity for SpaceX stock.”

Jonas stated that many investors expect SpaceX's stock price to decline further, and may fall to $100 after the first batch of restricted shares are unlocked next month. At that time, some insiders will be allowed to sell shares.

He believes that if the stock price reaches $100, investors are essentially valuing SpaceX's AI business at zero, or even assigning a negative value. The analyst gives SpaceX a price target of $300, with over 50% of the valuation derived from the company's AI business. Jonas wrote:

“The majority of investors we’ve spoken to significantly underestimate the value of Grok and Cursor. Many believe the AI business is worth zero or even negative, because compared to the space and connectivity businesses, the AI segment requires massive capital investment and its business model and profitability prospects remain uncertain.”

Investors Reduce Allocations to AI Sector, Analysts Remain Bullish on SpaceX

Amid the decline in SpaceX's share price, investors overall are reducing exposure to technology stocks, especially companies that have pledged to spend hundreds of billions of dollars building AI models and related infrastructure.

The weak macroeconomic environment and escalating tensions between the U.S. and Iran have pushed up oil prices, triggered concerns about inflationary pressures, and weakened investor appetite for risk assets.

However, according to data compiled by Bloomberg, Wall Street analysts overall remain optimistic about SpaceX stock. Nearly 80% of analysts covering the company currently give it a “Buy” rating. The average analyst target price is about $232, suggesting SpaceX shares still have more than double the upside from current levels.

The four other major banks that participated in the SpaceX IPO underwriting—Goldman Sachs, Bank of America, Citigroup, and JPMorgan Chase—all gave the stock the equivalent of a “Buy” rating.

Morgan Stanley’s Jonas Long-Term Bullish on Tesla, Now Sets $300 Target for SpaceX

However, among the analysts bullish on SpaceX on Wall Street, Morgan Stanley’s Jonas is one of the most optimistic. The $300 target price he offers is the third highest among the 33 analysts tracked by Bloomberg.

Jonas is no stranger to taking an aggressive bullish stance. He is best known for his long-term bullishness on Tesla and serves as an automotive industry analyst. Some of his previous high-profile views on Tesla have repeatedly triggered large swings in its share price. For example, two years ago, he named Tesla one of the top picks in the U.S. automotive sector, which helped refocus markets on the stock.

Last year, Jonas left his position in auto industry research and switched to research in artificial intelligence and humanoid robotics. Today, he remains bullish on SpaceX and reiterated his equivalent of a “Buy” rating in Friday’s report to clients. Jonas said:

“SpaceX has unique advantages in launch, connectivity services, and AI. We believe the current valuation level presents an attractive investment opportunity.”