Morningstar analysts have raised a red flag about SpaceX's artificial intelligence ambitions, warning that xAI's Grok chatbot is not among the leading AI labs today and that the company's overall valuation is significantly inflated. The research firm pegged SpaceX's fair value at $780 billion, less than 44 percent of the $1.77 trillion valuation implied by the company's $135 per share initial public offering price.

Why Is Grok Falling Behind in the AI Race?

Morningstar's assessment of Grok stands out as a notably skeptical take in an otherwise enthusiastic IPO environment. The chatbot, developed by xAI, has not yet demonstrated the capabilities or market position of competitors like OpenAI's ChatGPT or Anthropic's Claude. According to the research firm, the future of SpaceX's AI segment depends heavily on untested and speculative technology, which creates significant uncertainty for investors.

"We don't see Grok as one of the leading AI labs today," said Nicolas Owens, Morningstar equity analyst.

Nicolas Owens, Equity Analyst at Morningstar

The competitive landscape for large language models (LLMs), or AI systems trained on vast amounts of text data to understand and generate human language, has become increasingly crowded. OpenAI and Anthropic have established themselves as dominant players with proven track records, substantial funding, and widespread adoption. Grok, by contrast, remains a newer entrant without the same level of market validation or user base.

What Other Risks Does Morningstar Identify in SpaceX's Business?

Beyond concerns about Grok's competitive position, Morningstar highlighted several technological and business challenges that could limit SpaceX's growth potential. The company's ambitious plans rely on innovations that have not yet been proven at scale, creating execution risk for investors.

• Orbital Data Centers: SpaceX plans to place artificial intelligence data centers into space, a concept that remains largely theoretical and faces significant engineering hurdles that may be outside the company's control.
• Starlink Technological Hurdles: The satellite broadband business faces ongoing technical challenges, many of which depend on factors beyond SpaceX's direct influence.
• Unclear AI Economics: The financial viability of xAI's business model remains uncertain given the intense competition from established AI leaders and the high costs of developing and operating large language models.

Owens warned that while SpaceX's stock could rise in the near term due to low float (the number of shares available for public trading) and strong underwriter support from major investment banks including Goldman Sachs, Morgan Stanley, and JPMorgan, long-term investors should wait for a better entry point.

"We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO," Owens stated.

Nicolas Owens, Equity Analyst at Morningstar

How Should Investors Evaluate SpaceX's IPO Valuation?

SpaceX's IPO represents a historic moment for the company, but the pricing raises important questions about whether the valuation reflects realistic business fundamentals. The company's current $1.77 trillion valuation represents a 40 percent increase from the $1.25 trillion valuation SpaceX assigned itself in February, and a 15.6 percent jump from the $1.53 trillion valuation on secondary trading platform Forge Global.

The company's financial performance adds another layer of concern. SpaceX reported a $4.94 billion loss in 2025, a dramatic reversal from the $791 million profit it posted in 2024, largely due to increased spending on artificial intelligence initiatives. This spending surge underscores the capital intensity of competing in the AI space, where companies must invest billions to develop and train competitive models.

SpaceX plans to use IPO proceeds to fund various ambitious goals, including placing AI data centers into space and advancing human missions to Mars. However, these projects remain speculative, and their financial returns are uncertain. The company also disclosed a super-voting share structure that allows Elon Musk to maintain control despite his roughly 50 percent ownership stake.

Morningstar's contrarian view stands out in a market where enthusiasm for the IPO has been high. The research firm acknowledged that the stock could rise in the near term due to market dynamics, but emphasized that patient investors should wait for more attractive valuations. As SpaceX prepares to launch its roadshow and debut on the Nasdaq on June 12, the debate over whether Grok and other AI initiatives can justify the company's valuation will likely intensify.