Despite a significant recent sell-off, Wall Street remains largely bullish on the stock. Over 80% of analysts surveyed are assigning a buy rating to SpaceX, with the average price target implying a gain of approximately 90% from current levels.

On July 20th, SpaceX's shares fell over 3% from the previous Friday's close, settling at $119.85. This price is about 12% below its $135 IPO price. Measured from the intraday high of $225.64 in mid-June, the stock has now declined by more than 47%.

For investors tracking the space economy theme, the performance of SpaceX directly impacts funds like the ARK Innovation ETF (ARKK), which holds it as a core position. ARKK has purchased over $90 million worth of SPCX shares this month, making it the fund's sixth-largest holding.

Significant Unlock Pressure Ahead

One trigger for the recent selling was the 13th test flight of Starship being aborted on July 16th due to multiple engine ignition failures. While Elon Musk stated a new launch attempt would occur within days, the news added further pressure on the stock price after hours. Additionally, a broader contraction in risk appetite, influenced by the worst weekly performance for the U.S. semiconductor sector since last year's tariff-related volatility, has also weighed on SpaceX's valuation narrative.

The past week saw global markets face a compound shock from escalating Middle East geopolitical tensions, resurgent energy inflation, and a deleveraging of the AI computing momentum trade. The Philadelphia Semiconductor Index has fallen over 20% from its June peak, entering a technical bear market. South Korean markets, due to high exposure to memory chips and concentrated retail leverage, became an epicenter for the reversal in the global AI computing trade.

Analysis from Goldman Sachs' prime brokerage unit, led by Vincent Lin, noted on July 21st that hedge funds have been exiting U.S. tech stocks at a record pace over the past eight weeks, being net sellers in six of those weeks. The cumulative reduction in market cap exposure reached about 10%, the highest since tracking began. The unit stated that the persistence and scale of selling since early June indicates tech investors have meaningfully reduced positions, with some signs of capitulation emerging amid ongoing volatility in semiconductors, memory, and AI infrastructure.

What has truly sharpened the focus of SpaceX bears is the impending unlock pressure. According to SEC data, the first lock-up period is expected to expire on the second trading day after SpaceX's Q2 earnings report (around August 6th), potentially freeing up to approximately 911.5 million Class A ordinary shares for trading. If certain stock price conditions are met, an additional ~455.8 million shares could be unlocked early, potentially quadrupling the float. Data from S3 Partners shows that about 30% of SpaceX's current free float is already on loan for short selling, a figure that has risen 10 percentage points in just 10 days. Short sellers have racked up roughly $4 billion in paper profits, with total short interest reaching around $25 billion.

A small hedge fund CIO who profited about $20 million by shorting SpaceX in early July quipped that with more shares set to become available, even if SpaceX announced it had conquered the moon and found gold there, investors wouldn't have enough funds to absorb all the stock.

Beyond equity, SpaceX has raised an additional $25 billion through corporate bond issuance since its IPO to fund AI infrastructure investments and the acquisition of xAI. Concerns about its debt-servicing ability are rising. The yield on one of SpaceX's 30-year bonds has climbed from 6.7% at issuance to 7.4%, with its price falling to about 91 cents on the dollar. Credit default swap spreads have also widened from around 110 basis points in late June to 158 bps, indicating the market is repricing the risk of the company's debt.

Dec Mullarkey, Managing Director at SLC Management, noted that investor enthusiasm for SpaceX seems to have cooled, with both its stock and bonds now pricing in more risk.

Wall Street Maintains Bullish Stance

Despite these headwinds, Wall Street's long-term bullish stance on the stock has not shifted. Of the 32 analysts tracked, 27 maintain a "buy" rating, with the average price target implying an upside of about 86% from last Friday's closing price. Analyst Brian Gesuale from Raymond James has even issued a staggering long-term price target of $800 for 2031, implying a valuation exceeding $10.5 trillion.

The coming weeks will be critical for SpaceX's trajectory. The rescheduled 13th Starship test flight, expected in late July, will directly impact market confidence in the deployment timeline for Starlink V3 satellites. Subsequently, following the Q2 earnings report in August, whether Starlink user growth and AI cloud revenue can support the current valuation will influence the selling intentions of shareholders in the first unlock wave. From then until December 8th, the proportion of freely tradable shares is set to rise further to about 40% of the total share count, meaning supply-side pressure will persist through the second half of the year.

Mark Malek, Chief Investment Officer at Siebert Financial, commented that considering the upcoming lock-up expirations, many investors may have reassessed their initial views, while potential investors on the sidelines are likely waiting for lower entry points, which could well materialize as valuations rationalize.

Taking a broader view of tech and AI stock trends, Benjamin Jones, Global Head of Research at Invesco, noted that over the long term, AI has the potential to boost productivity, improve efficiency, and reduce costs. However, data centers require massive power, semiconductor capacity needs expansion, grids require upgrades, and factors like cooling systems, copper, specialized labor, financing, and permitting are equally crucial. Therefore, AI is not just a tech theme but resembles an infrastructure build-out cycle, which often brings inflationary pressures before productivity gains. From this perspective, the AI construction wave is still expected to support corporate earnings expectations, capital expenditures, and the dominant position of the tech sector in equity markets.

Reports indicate that SpaceX is in talks to sell computing power to the U.S. Department of Defense. If successful, this would add to a series of infrastructure-related deals for the company. The potential transaction, valued in the billions of dollars, would be similar to SpaceX's previous agreements with Alphabet and Anthropic.