On June 12, SpaceX (SPCX +19.17%) completed the largest initial public offering (IPO) in history, raising about $75 billion at a valuation of about $1.75 trillion — more than double the size of any stock market debut before it. By the closing bell, the stock had jumped 19%, lifting the rocket-and-satellite company’s value above $2 trillion.
SpaceX went public in the middle of a wave of artificial intelligence (AI) spending unlike anything the market has seen, with the four biggest technology companies alone on track to pour about $725 billion into capital expenditures (much of it on data centers and chips this year) — up about 77% from last year. To some investors, a record listing landing on top of all that spending looks like the kind of enthusiasm that shows up near market tops. To others, it’s a rational response to seemingly insatiable demand that remains largely unmet.
So, is this the top? Here’s a look at both arguments.
Image source: Getty Images.
The bear case
Bursts of giant, money-losing IPOs have often clustered near market peaks, and SpaceX fits the profile. The company priced at more than 90 times its 2025 revenue while posting a $4.9 billion net loss for the year — a loss driven largely by the AI unit, the former xAI, that Elon Musk folded into the company.
Yet demand for the IPO was heavy enough that the offering was oversubscribed several times over, with retail investors alone reportedly submitting more than $70 billion in orders.
The backdrop looks stretched, too.
The S&P 500‘s cyclically adjusted price-to-earnings ratio sits near 40 — a level it has touched only once before, during the dot-com bubble.
Then there’s the spending. The four biggest AI spenders — Amazon (AMZN 1.24%), Microsoft, Alphabet (GOOG +0.44%)(GOOGL +0.53%), and Meta Platforms — are spending so heavily that their free cash flow has plummeted. Indeed, Amazon’s trailing free cash flow has fallen about 95%, to $1.2 billion, and its 2026 capital expenditures of about $200 billion look poised to outrun its operating cash flow, turning free cash flow negative for the year. To keep building, the group has leaned heavily on the bond market, and Alphabet recently announced a massive $85 billion equity raise.
Meanwhile, the payoff remains hard to find. A widely cited MIT study found that about 95% of corporate generative-AI pilots have yet to produce a measurable return, and in PwC’s latest global survey, 56% of CEOs said they were getting essentially nothing from their AI efforts so far.
The bull case
But the other side of the argument starts with a simple observation — the demand is extraordinary.
“[W]e are compute constrained in the near term,” said Alphabet CEO Sundar Pichai during the company’s first-quarter 2026 earnings call. “… [O]ur cloud revenue would have been higher if we were able to meet the demand.”
In other words, Alphabet is turning away cloud revenue because it can’t add capacity fast enough. Behind that comment, Google Cloud revenue grew 63% in the first quarter, and its backlog (contracted business it hasn’t yet delivered) nearly doubled sequentially to more than $460 billion. The other big providers are growing quickly as well, with Amazon’s AWS accelerating sequentially to a year-over-year growth rate of 28%.
Today’s Change
(0.53%) $1.90
Current Price
$359.67
Key Data Points
Market Cap
$4.4T
Day’s Range
$354.97 – $366.54
52wk Range
$162.00 – $408.61
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854.1K
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29.5M
Gross Margin
60.43%
Dividend Yield
0.24%
The bulls also point out that these companies have done this before. The same cloud and data center investments that critics once called reckless have become highly profitable businesses. From that view, spending ahead of demand is how the last technology cycle was won, not a warning sign — and Goldman Sachs projects AI-related spending will climb toward $1.6 trillion a year by 2031.
So, where does this leave investors?
Both sides of the argument deserve some consideration. The skeptics are right that valuations are rich and that we’re still largely waiting to see profits big enough to justify this unprecedented spending cycle. And the optimists are right about demand: backlogs are massive, and they seem to keep climbing.
To me, the honest read is that neither camp has won the argument yet. Which one turns out to be right will come down to the single question neither can answer today — whether all of that spending eventually produces the profits to justify it.
With all of this said, I believe investors may want to consider allocating some of their portfolio to areas that could benefit if the AI boom continues longer than expected, as well as to more conservatively valued investments, with exposure to sectors likely to be more resilient during a pullback in AI spending.
