Valuing SpaceX and the AI swing factor (with Romaine Bostick, Katie Greifeld)

Aswath Damodaran

SpaceX is about as close as you can get to Stark Industries—a futuristic company in space. It's an engineering marvel, but it's still a company with only $20 billion in revenues and losing money. The value comes entirely from what you think about its future. It's a three-business company loosely tied together by outer space, and it's in a pretty good spot in each.

The valuation is entirely forward-looking, not based on current earnings.

Aswath Damodaran

The AI business is the swing factor. It's a huge potential market, but much is unknown. OpenAI is cutting prices, telling you competition is going to be upfront. The cost of delivering products and services is still a big unknown—power, water, other costs. If people disagree on what SpaceX is worth, it's around AI that the disagreements will revolve.

The AI business has the greatest potential but also the most uncertainty.

Aswath Damodaran

Traditional metrics like P/E or EV/EBITDA are almost useless here. But the value of a business still comes from generating revenues, profits, and cash flows. The missing ingredient is your imagination—you need to tell a story about the business. If you think AI will replace every white-collar worker, your potential market is much bigger. I don't think that's likely, but those are the disagreements.

Valuation requires a narrative about the future, not just extrapolation of past numbers.

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