Retail investors are aggressively buying SpaceX shares during the recent sell-off, even as a massive lockup period for nearly $100 billion in restricted shares expires, potentially adding to short-term volatility.

Shares of space exploration company SpaceX plunged 13.61% on Wednesday, driven by investor concerns over surging AI-related spending. However, institutional data shows that individual traders have continued to pour into the stock, adopting a buy-the-dip strategy. With some restricted shares about to become tradable, the immediate impact may not yet be fully felt.

Retail investors keep buying

According to Vanda Research, individual traders net purchased $22.7 million worth of SpaceX stock in the first hour of trading alone. This marks the third-largest hourly net inflow since the stock began trading 37 days ago. "This shows that retail investors' enthusiasm for buying after earnings-driven declines has not waned, but has instead become more opportunistic," the firm noted.

Since SpaceX's June 12 IPO, the largest in U.S. history at $135 per share, there has never been a single day of net selling by retail investors. The company's latest earnings report triggered a sharp sell-off, as investors worry about how long the profitable Starlink business can sustain the heavy costs of AI investments. SpaceX disclosed second-quarter capital expenditures exceeding $18 billion, nearly 40% above market expectations, most of which was allocated to building data centers and other AI-related projects.

Russ Mould, investment director at AJ Bell, commented: "When similar high spending occurred among SpaceX's peers, the market already expressed displeasure. The scale of this AI spending, and the extent to which it exceeded analyst forecasts, is the key reason for the collective sell-off. Starlink is currently SpaceX's only profitable business, and its performance is indeed impressive. But for the stock to stabilize and recover, the company must present a clearer path to profitability."

SpaceX CFO Bret Johnsen attempted to calm market concerns about capital expenditures on the earnings call, stating that the company's capital deployment remains efficient. "In AI computing, our capital investment has a payback period of less than one year," Johnsen added.

In contrast, retail investors view the pullback as a buying opportunity, betting on the long-term narrative of space combined with AI. Vanda Research noted: "Institutions initially focused on the sharp rise in AI capital spending and near-term earnings pressure, while retail investors reached the opposite conclusion. Today's buying activity suggests that investors believe large-scale AI investments actually increase the probability of SpaceX becoming a long-term winner, rather than a reason to sell."

Lockup expiry impact ahead

On Thursday, SpaceX faces another event that could roil the market: the expiration of insider share lockup periods, allowing early shareholders and employees to sell their holdings. Exchange data shows that 911.5 million shares, worth over $100 billion, are set to be released from lockup. This would more than double the company's free float.

Notably, additional shares will become unlocked in August and September, with the process continuing through December. This is one of the largest post-IPO share lockup expirations in U.S. history.

Brent Donnelly, founder of Spectra Markets, reviewed past high-profile stocks to observe their performance after lockup expirations and the influx of new shares. Historical data shows that each initial lockup expiry created a buyable bottom, though not all stock recoveries were V-shaped. Donnelly commented: "My basic view is that the impact of this event is likely already priced in by the market. The upcoming supply shock is more likely to be a disruptive factor at this stage rather than a valid bearish signal."