Welcome to the halftime report. I'm Scott Wapner. We're here at Post9 at the New York Stock Exchange. We've opened for business in the biggest IPO ever, up about 16% right now. We'll track every single move of it. SpaceX investor, Altimeter Capital founder and CEO Brad Gerstner is with us here. Stephanie Link is as well, Malcolm Ethridge, and Rob Sein. Great to have everybody here. It is a momentous day. The timing of this getting it open before noon, momentous in and of itself. You got a big allocation.
What do you think you're buying into today? What do you feel like you are?
First, let's just take a moment, Scott. Thanks for having me on. Take a moment to celebrate what an incredible day this is for America. What an incredible day it is for the hard work of the thousands of people at Starbase who've worked to put us back on the top in space. Remember when SpaceX got started? We didn't even have a shuttle to go to space to pick up our own astronauts. We were paying the Russians to go get our astronauts. Today, we're back on the top in space. I think this is what makes the country great. It's a great moment to celebrate. With that said, yes, we were buyers in the IPO. We were lucky enough to be shareholders ahead of the IPO. I think it's an incredible moment for the company. The numbers that are out there are not layups by any stretch, but hopefully today we can unpack that a little bit, Scott, because I think they have a real path on both AI hyperscale compute, on X.AI, on launch, and the things they're doing in connectivity that are going to change the country.
Yeah. You mentioned some very, very big numbers, and this is where the real work begins, right? To try and reach those lofty targets that some have set, including the company itself. A TAM of 28.5 trillion. Morgan Stanley's looking for SpaceX's revenue to reach 3.4 trillion in 2040. Lofty targets, obviously, by Goldman Sachs as well. So now we see what they can do from here, right?
Well, let's not go all the way out to 2040. I think it's 160 billion, which is a little more pedestrian in 2028. And remember, something extraordinary happened the last time I was on the show just a couple weeks ago. I said everything about the IPO changed. Why? Because they had moved into the category of being an AI hyperscaler. In literally six weeks, they went from not in the game to 27 billion of AI hyperscaler revenue with big deals from Anthropic and Google. What is the one thing we can all underwrite? I think we can all agree Elon Musk and the team at SpaceX are as capable as anybody on the planet. Jensen has said they're number one at standing up terrestrial data centers, at standing up AI data centers. On my podcast, Jensen said they did in a hundred days what it took others two to three years to do. So, if the bet in going from 20 billion or 18 billion last year to 160 billion, a huge portion of that is standing up AI data centers and leasing them right to the Anthropics of the world, the Googles of the world. I think they're going to run away and consolidate that business. My estimate is in a few years they're going to be the largest AI hyperscaler in the United States.
It's probably why, as you heard Sequoia's Shawn Maguire in the interview with our friends in the prior hour, suggest that that massive TAM that I mentioned could be, in his words, an underestimate. This company has the most important mission of any company in history. He said thinking about 10 years from now, I think of it more like Nvidia 3 years ago. High confidence in the explosive revenue growth that they can deliver, and he made the point which was really interesting to listen to, and they can ramp really quickly. To your point, they've already proven their ability to ramp certain parts of the business really quickly, so doubt those large numbers at your own peril, I suppose.
Yeah, listen, again today, this was not a get-rich-quick scheme. Today, $1.7 trillion is not an inadequate valuation. You see the stock up 20% today. I mentioned the AI hyperscalers. What we haven't mentioned is the pending acquisition of Cursor. Look, we were looking at investing in Cursor. I think it was probably the next best lab in the country beyond the frontier labs. We thought this company could get to 10 billion in revenue on its own this year. Right now, coupled with SpaceX, we think they can really have a shot at building with that huge compute infrastructure, really building another frontier lab. Remember, intelligence is the log of compute. They have the largest coherent clusters in the country. And so, we think they're going to be in the game at building X.AI into a real frontier lab.
Steph, you're one of the few in our orbit, pardon the pun, who would want in on this IPO. Who said you're going to be a buyer? Are you?
I thought this was going to be up 40 to 50%. Up 20, it's an absolute screaming buy. But I also said you buy a small position, it's going to be volatile, and you just set it and you forget it because he has a great track record. Elon Musk, Tesla was up 25,000% since their 2010 IPO, and that is a big, big number. So who knows what this company is going to do, but a total addressable market even if it's half of the 28.5 trillion that is estimated, that's still huge runway for this company. And founder-led companies usually increase shareholder returns by double.
So you want to own a founder-led company. They have the sense of urgency, and he does. We know that for a fact. The space business, they have a 90% share. Starlink, they have 10 million customers. Brad just talked about the AI opportunity. There's a lot of ways this company can win. They can just win in one of these things. And I think the stock is much higher. You've owned this stock in pretty good size in the private market and in the IPO as well.
We've been participants across our client base. I think this is the most strategically unique asset ever to come to market, and they're going to have enormous pricing power. The one risk is their biggest client, the US government. So when you have that type of pricing power, monopolistic pricing power where your costs are coming in tremendously and your profits are going up enormously, the revenue opportunity and everything that Brad outlined. And by the way, if you can't listen to that and get excited about this business, there's actually something wrong with you. This IPO is the most engineered IPO in history, too. Do you think any of the underwriters are not going to support this? The size of the offering, the retail participation. So there's a lot to be excited about: the index inclusion, NASDAQ 100, right? So much that is supportive here. Now, there is a huge underwriters lockup coming off at some point in the future. There may be an opportunity at some point to be a better buyer. However, I think there's so much enthusiasm around this, and if you're a really long-term thinker and you believe in the visionary characteristics of this man, I don't know how you can't be excited. And I think the writing's on the wall in the road show that this and Tesla could be together at some point in time.
Well, that's the great speculation. And so the stock is up about 20-ish% as Leslie Picker was saying from the trading floor of Morgan Stanley, the sweet spot if you will, and how these things are hoped to trade in their earliest moments of trading. What about you? Interest from you, or no, Malcolm?
No. And I think that Brad framed it perfectly as far as what you should be considering this company to do if you're buying in at IPO. Right. The S-1, the prospectus, told you basically we're an AI company now. Right. The focus, the TAM that they talked about, the 28 trillion dollars, which by the way is the size of the GDP of the entire United States, but that aside, like the TAM is all from AI. It has nothing to do with launching rockets. It has nothing to do with satellite connectivity. And I'm being general when I say nothing to do with, but most of it is hyperscaler capex related to we're building data centers trying to unseat some of the biggest.
Which is funny because now the biggest revenue percentage they get is from the connectivity angle.
Starlink's the biggest contributor today. Not suggesting in any way that that means it's the biggest contributor in the future, because it's obviously in what you're saying is factual, but it speaks in some respects to how this company is transforming itself in real time. Let me finish my thought. What I was going to say is if you really want pure play space, because the name is a little bit misleading now, SpaceX, you could be looking at like an AST that's selling off tremendously today. You could be looking at Rocket Lab, which is selling off tremendously today in response to raising capital to go participate here. Just by comparison, if I wanted a hyperscaler that's building to put AI data centers all over the country and all over the globe, I don't have to pay a hundred times sales to do it. I could look at something like an Alphabet at 10 times sales. I could look at an Amazon at 3 times sales. What about X.AI is so much more valuable, 27 times roughly the value of Amazon at this price point? That's the question I have to be asking.
I'll let you answer that.
Yeah. I think the pushback is important and fair. Just to go to the numbers for a second, I think if you look at Goldman Sachs and Morgan Stanley's numbers for 2028, they have AI about 2x what the connectivity or Starlink revenue is. So Starlink is going to be a massive, massive business. We shouldn't underestimate it. And remember, Starship being able to have the advantage that it's going to have to space unlocks everything else. So the call options that we're valuing of orbital data centers, of all the stuff that lies in front of us. And remember, we're applying a future multiple. We're not looking backwards. We're saying what is this going to be worth in the future? We have the greatest visionary, the greatest engineer, the greatest operator. And let's give a shout out to Gwynne Shotwell and the team. Everybody always talks about Elon, but standing right behind Elon is an extraordinary team that has been relentless for decades, putting us back on top.
She was probably there, you know, at some of the darkest moments of the trajectory of this company, even getting to a day like today. One of the earliest employees, I think Elon said maybe number seven or something to that regard. But if you look at Elon himself when he was addressing his own employees this morning from out at their HQ, the Starbase, he said that 10 years ago, I gave SpaceX less than a 10... I'm sorry, he said I gave SpaceX less than a 10% chance of succeeding at all. That was back in 2002. It speaks to the road full traveled to get to this day. And I'm glad that you mentioned her and the role that she's played, because she's been there from near the beginning to help get this company to this moment.
Right. And we're here celebrating these moments, but the near-death experiences that Elon and Gwynne will recount time after time, not just at SpaceX, at Tesla, etc. And they continue to reinvent themselves at scale. Just think about what they did over the last six weeks heading into this IPO. Not to mention launching Falcon 9 with a bunch of satellites the morning of the IPO successfully into space. But just in the last six weeks, doing these deals, these AI hyperscaler deals, acquiring or an option to acquire Cursor. These are massive things. I can't imagine another Mag 7 company that's as entrepreneurial like this at this scale. So if you ask me why I'm betting on them, right, you don't have to be either/or against Alphabet, by the way. You don't have to be either/or against it. You can bet on those companies as well. But this one, to me, if you wanted to bet one company on the future of innovation, the best entrepreneur that combines visionary with engineering skills, you got to be moonshot optionality is what he's talking about. There are so many different verticals that they are focused on to get moonshot optionality. And I think granted to Malcolm's point, there wasn't a lot of discussion on that topic in the road show. It's so funny. It was such a big part of the valuation, but they didn't address it a lot in the road show. They focused on their core business. That's admirable.
Well, look at what Wolf is saying today, right? They're one of the early initiators. So the street is sort of starting to weigh in. 175 is their price target. So you're looking at 30% from the set price. We'll obviously see what's happening in the trade here. It tells a little bit of a different story from this moment forward, but they call this quote, 'A launch company wrapped in a telecommunications company wrapped in a hyperscaler. Near zero space launch cost creates one of the widest moats in history that will drive 70% top line growth and near doubling EBITDA margins through 2030.' I mean, they have 90% share in space as I mentioned, but they also have a huge cost advantage because they have reusable rockets and they have scale, so their launch costs with Starship's launch costs are going to go from 14 million to something like 3 to 4 million. That is a lot of operating leverage in one of their businesses, and they could probably get, in terms of Starlink, 250 million customers between now and 2030. That's what's projected. If they get half of that, that's a heck of a lot better than where they are today at 10 million. So to me, yeah, the AI story is interesting and Anthropic and Google certainly make it more interesting, but I think there are a lot of other parts of this company that are very exciting and I don't think it's getting enough attention.
Let me say one thing. Make no mistake about it. This valuation hangs on the fact that we have huge demand for an AI compute future, right? They just sold this compute to Anthropic and Google at a big premium, Scott, because we are out of compute in this country. If you look at Noam Brown, who's one of the lead researchers at OpenAI, I'd encourage you to check out a tweet he had the other day. Noam basically said that because of test time compute, if we let things run, the current models run long enough, they can solve almost any problem. What that means is that we're at recursive self-learning, but we're lacking compute. So the world is going to be massively consumptive of compute. He's the best at building and standing up the compute. There are rumors out there that he's already putting in for 20% of all the Vera Rubin volume right from Jensen Wong. He's going to take it and stand up more data centers for himself. It creates tremendous optionality for X.AI. Make no mistake about it. Elon intends to be on the frontier himself. He is not ceding the AI race to Anthropic and OpenAI.
What price though, right? Because I don't dispute anything you're saying about what the future looks like, but for the sake of the viewer, I want to just draw attention one more time to the price we're talking about paying for this. Because this company is coming public and it's one of the top six or seven largest companies now trading. That is massive, and it's also going to have massive implications for the entire market itself going forward the rest of the year. So I think it's really important if you're a viewer watching this and thinking with all of the excitement, have I missed the boat? Do I need to get in on this? Before you open up your trading app and get ready to place that trade, I just want you to think about the price that you're preparing to pay.
Well, I think Brad's made that point repeatedly that the greatest rewards arguably have been realized in the private market to this point. You're paying the valuation you are today on the massive bet that people are making for the future.
If you don't believe in the future, then you wouldn't buy the stock today. You're obviously making some degree of a leap of faith, which is why the market cap is now above $2 trillion. Now, if Maguire of Sequoia says it's more like Nvidia 3 years ago, is that where we're heading? That's 5 trillion.
Well, actually, Nvidia is up about 15x from where they were 3 years ago. So I don't think Sean was suggesting that SpaceX is going to be up 15x over the course of the next 3 years. But where I think he was right is he's talking about all the untapped optionality. Orbital data centers, launch two to three times a day. What that unlocks in terms of the space and communications business. What that unlocks in terms of AI hyperscaler business. Again, if you think about terra, this year we added 25 to 30 gigs of compute. Elon's talking about adding a thousand gigs of compute a year. But I want to come back to this thing about whether we should be running out and buying this today, because I'm not here to pump the stock to every retail investor out there. You're absolutely right. It's fair. Today it's trading in an open market, and I would say it's fair value today. There is no get-rich-quick scheme. We saw what happened with CoreWeave, right? Just a few weeks ago. It pops on the open, it sells off. I think that creates opportunities then for people who are doing their work to step in. Can I ask you a question?
When you're getting a lot of comparisons to Meta, another large IPO came public, did what it did, sold off, gave investors an opportunity to get in because of the size, because of the news flow that was around it, because of some of the lockups that came off. What do you think about those types of comparisons, given you're an investor in both, as am I, by the way?
I mean, the reason that Facebook sold off and we were huge buyers into that sell-off was because there was an issue at the open. They made a bet on HTML5 rather than native apps, and people didn't think that they could monetize their mobile application, and everybody was moving off a desktop to mobile. So there was a fundamental reason that caused a lot of questions. It was not just a valuation question. And by the way, when it was on the cover of Barron's, if you remember the huge arrow going down, it hit 17 bucks a share. We put 20% of our fund in. It was a one-way street from there up. So that was a counter indicator. And what they did, like any great founder-led entrepreneur, is he pivoted. He said, 'Okay, we'll just go build a mobile app.' And they monetized the heck out of it. The same thing, I think, when you're looking at this. You shouldn't, if you want to have a little fun and day trade this thing and try to make a few bucks, great, have at it. But if you want to bet on this over the long term, if you take Morgan Stanley and Goldman Sachs's numbers, you know, I have my 15-year-old interning. He's around here somewhere. He's interning with Altimeter this summer. He's using Fable 5 to build his SpaceX valuation model. He's running all these Monte Carlo simulations on where this is. It's totally fascinating and exciting. But he said, 'Dad, my target price for this in 2030 is that this can be a 2 to 3x.' And then we talked about what that meant for the IRR, what's the annualized return for that. So it's not a 15x over the course of the next 3 years, but I think it will be a competitive return with the best in technology, with a call option to the upside. And so for any institutional investor, any hedge fund investor, this is a must-own for most of us in our institutional portfolios. And 15 days from now, you're going to see $20 to $30 billion of demand roll into the market as the index funds start buying the security.
Young Mr. Gerstner sounds like he's well on his way as well, a future guest perhaps of some of the future IPOs. We'll see. The idea that SpaceX and Tesla could one day combine, you put a lot of stock into that.
Yeah, I think it's a high probability event. I would frankly encourage Elon, and for his own sanity, to do it. You know, running these two public companies that have such an overlapping mission. I mean, at the primitive of robotics is AI, right? And so you now, rather than having four different places where he's building AI, remember just a few months ago you had Twitter over here, you had X.AI over here, you had Tesla over here. Rolling these things all together, right? And giving him the cost synergies associated with it, the data synergies associated with it, the revenue synergies. I think it will accelerate the path, right, to Optimus. It will accelerate the path to X.AI being a frontier model. Well, just to get Terafab under that roof will do a tremendous amount to get you where you're talking about that call option to the upside, because right now they're not vertically integrated, which means you're losing.
And there's a debate as to whether, you know, remember Elon has control shares and control of SpaceX. He doesn't in Tesla, right? And so there are a lot of people saying, well, he's going to do it so that he gains control. For most of us as shareholders who want to back founders who have control, I'm actually excited about that, right? I have no problem with Tesla coming in here, maybe at a premium, in order for Elon to consolidate his bets on AI and robots.
Can we speak to the Musk premium, if you will? All of you, really. If you consider how unique this story is and how unique he is as an entrepreneur. He's certainly one of the greatest entrepreneurs and operators, tech technicians, technical thinkers that we've ever seen. If you consider a pioneer in digital payments from way back when, Neuralink, Boring, XAI, he didn't found Tesla, but he joined and sort of took it to another place, obviously. So much of what everybody's going to be buying into today, in some respects, is him. Speak to that.
Yeah.
Well, I think very often we don't acknowledge on this desk, right, that one or two people at the heads of these companies determine their fate, right? So you want to back. If all I did in my career is back the best founders and the best leaders and short the others, I would have done extraordinarily well. Too often you try to make excuses for the person you know is not a great leader. In this case, he's an extraordinary visionary, technologist, engineer, and next to him people like Gwynne Shotwell, who are extraordinary operators. It is the type of people that you want to be backing. But one of the things I'd bring up, Scott, remember Elon came here from South Africa, and Elon's talked about this at length. We need to remain the place that all these incredible people that want to invent the future want to come here. They want to come here and do it. And unfortunately, when Elon was in California, he was being demonized and attacked by people like Lorena Gonzalez, who ran the state senate in the state of California. And when he left California, she said good riddance. This is a problem we have today in America. We need to celebrate entrepreneurship. This creates the abundance that we have. Yes, we need to do things like Trump accounts to raise the floor for these kids and do all these things.
And by the way, kudos to you for your involvement.
Thank you. But I look around the table of SpaceX, the number of people who came from outside the United States to invent the future, to create this $2 trillion of value, and the true trillion of value goes to teachers and firefighters.
That's fair, but in fairness, we are having a broader debate about immigration in this country. And if you want to cite the fact that he's from South Africa and we need more people of his quality or whatever to come into this country and try and be the next or move the ball of this arena forward, then your message needs to be heard as much in the halls of this place as it does down in Washington, because that debate is fierce right now, as you know, and it's trending in a direction that's not what you hope it would be.
