SpaceX at $100 would imply zero AI value, Morgan Stanley says

The selloff in SpaceX shares has driven the stock near a level that would imply investors are assigning no value to its artificial intelligence business, according to analysts at Morgan Stanley.

The rocket, space and artificial intelligence company has had a rocky trading debut after its record $86 billion offering in mid-June. Shares initially surged nearly 50% in first three sessions, but have tumbled since. They touched a low of $110.85, or 18% below the IPO price, earlier this week.

“We believe the current disconnect between increasingly bearish investor sentiment and largely unchanged fundamentals creates an attractive entry point in SpaceX shares.” Morgan Stanley analyst Adam Jonas wrote in a note to clients Friday.

Jonas said that many investors expect SpaceX’s stock price to fall further and hit $100 per share when a lockup on the first batch of shares unlocks next month, allowing some insiders to sell. At that level, he argues, investors are pricing in zero or even negative value from its AI segment.

The analyst has a $300 price target on SpaceX’s stock, out of which more than 50% is ascribed to the company’s AI segment.

“Most investors we speak with significantly discount Grok & Cursor,” Jonas wrote. “Many ascribe zero or even negative value for AI given the high capex requirements relative to Space & Connectivity, largely uncertain economics, and the high degree of management time devoted to the business.”

The selloff in SpaceX comes as investors have broadly rotated away from technology firms that have committed to spending hundreds of billions of dollars on AI and the infrastructure needed to support it. A shaky macroeconomic backdrop, and elevated tensions between the US and Iran, have boosted oil prices, fueling concerns about inflation and souring the sentiment for risk assets.

Still, Wall Street is overwhelmingly bullish on shares of SpaceX, with nearly 80% of analysts covering the company recommending buying shares, according to data compiled by Bloomberg. The average price target of about $232 implies the stock will more than double from where shares currently trade.

Analysts from Goldman Sachs Group Inc., Bank of America Corp., Citigroup and JPMorgan Chase & Co. — the other four banks who led SpaceX’s offering with Morgan Stanley — all have issued buy-equivalent ratings on the stock.

Morgan Stanley’s Jonas, however, counts among the most bullish on Wall Street when it comes to SpaceX. His price target is third highest among 33 analysts tracked by Bloomberg.

It’s a position not unfamiliar to Jonas, who is best known for being a longtime Tesla Inc. bull and automotive industry analyst. His eye-catching calls on Tesla were often enough to cause outsized moves in the stock, including two years ago when he named them a top pick in the US autos sector. Jonas stepped away from autos last year to take on coverage of AI and humanoid robots.

He is sticking with his bullish call on SpaceX. In his Friday note to clients he reiterated his buy-equivalent rating.

“SpaceX remains uniquely positioned across launch, connectivity, and AI,” he said. “We see the current valuation as an attractive entry point.”