Target Price of $800, $6 Billion Buy Wall – Why Didn't It Support SpaceX?

TL;DR

· On July 7, SpaceX was included in the Nasdaq 100 and experienced a first-day drop, with the expected passive buying not providing immediate support.

· Market sentiment is focused on how much of the current valuation has already priced in the value of Starship, Starlink, and AI infrastructure.

· Related Tickers: SPCX, QQQ/QQQM, Goldman Sachs, Morgan Stanley, JPMorgan, AI infrastructure theme.

SpaceX officially joined the Nasdaq 100 index on the morning of July 7, but its stock price dropped over 5% on the first day, closing around $149.

This was contrary to the expectations of many investors. Nasdaq announced that the global assets tracking the Nasdaq 100 exceeded $800 billion. Based on this, the market estimated that SpaceX's inclusion might bring about $4 billion to $6 billion in passive buying.

Coupled with Wall Street's focused coverage after the quiet period expiration, this was initially seen as a typical liquidity boost. However, the first-day price reaction reminded investors that index inclusion does not guarantee price protection. The market is trading on whether this passive demand can overcome pre-positioned selling pressure, valuation realization, and the potential post-initial earnings release supply.

Passive Buying Provides Liquidity, Not Direction

The mechanism of index inclusion is not complex. Once a stock enters the Nasdaq 100, funds mirroring this index need to buy proportionally to reduce deviations from the index. These funds usually do not assess whether a stock is expensive or not, hence they are referred to as passive buying.

SpaceX attracted attention this time due to the swift pace. The company's announcement revealed that SpaceX completed its IPO pricing on June 11 at $135 per share, began trading on June 12 under the ticker SPCX. Less than a month later, Nasdaq declared it would become a Nasdaq 100 constituent stock before the opening on July 7.

This created an easily spread trading narrative: a super-new stock, rapid inclusion in an index, index funds must buy. Estimates cited in market reports by Barron's and others suggest that passive demand could reach around $4 billion to $6 billion. This figure is not an official Nasdaq or SpaceX metric, but it was substantial enough to serve as an anchor for short-term pre-positioned trading.

Passive buying is real demand but not one-sided. The expected purchases by index funds are often front-run by other investors. By the time the inclusion becomes official, early entrants may choose to sell stocks to these mandated buyers.

Therefore, a drop on the inclusion day should not be simply understood as "passive funds did not buy." A more accurate statement is that passive funds provide liquidity, while active funds determine the day's price direction.

Inclusion Day Trading Represents Selling Pressure

SpaceX dropped on its inclusion day, primarily due to post-news rally sell-off by active participants. The IPO was priced at $135, and the post-listing price quickly rose above the IPO price. Before the inclusion, the market had already absorbed some of the index buying expectations.

The macro environment did not cooperate either. On July 7th, the tech and semiconductor sectors were under pressure, and high-valuation growth stocks were more susceptible to a risk-off sentiment. For short-term funds, when the overall market sentiment weakens, the anticipated index-driven buying actually becomes an opportunity to take profits.

A more sensitive variable is the next round of supply. Public filings and secondary analysis indicate that after the first earnings report, about 20% of early released lock-up shares may be unlocked. An additional 10% could be released if certain price conditions are met. This does not guarantee immediate selling by the relevant holders, but it does alter the market's expectations of future supply and demand.

Short-term buying is one-off, but the anticipation of unlocks will influence the holding intentions in the following weeks. Investors are not only asking "How much do index funds need to buy?" but also "Will early shareholders and insiders take advantage of improved liquidity to sell?"

The drop on July 7th does not mean the market is dismissing SpaceX's long-term narrative. It's more like a switch in trading rationale: from trading inclusion expectations to trading the supply risk before the unlock.

From $300 to $800, Disagreement Lies in Long-term AI Options

If we only look at the number of ratings, SpaceX still appears to be mostly bullish on Wall Street. According to media summaries, after the quiet period, most analysts gave positive ratings. However, investors should pay more attention to the range of target prices and which businesses are actually included in the valuation in different models.

According to brokerage reports, Morgan Stanley's Adam Jonas team set a $300 target price and valued the space launch business at around $8 per share separately. This breakdown is quite informative: in this model, the visible launch business today is not the main valuation driver; the greater upside potential comes from the commercialization imagination of Starship after lowering orbital access costs.

Raymond James' Brian Gesuale is even more bullish, with reports stating his price target is $800, considering AI-related revenue around 2035 as a key assumption. The crux of this assessment isn't whether the rocket can fly, but whether SpaceX can transform from a launch company and satellite internet company into an orbital AI infrastructure platform.

The meaning of a long-term valuation option is that today's stock price already includes a bet on future new business. It may be very valuable, but the path to realization is longer, depending on several key milestones: whether Starship can achieve stable reusability, if launch costs can continue to decrease, whether Starlink can expand, and if the AI computing or data business can secure contracts and profits.

A conservative stance would emphasize the other side. The current valuation of around $2 trillion has already priced in a significant amount of future growth. The split from $300 to $800 essentially reflects the market debate on how much of a premium should be paid today for the story post-2030.

This also explains why a positive rating hasn't automatically turned into price support. Ratings can reinforce a long-term narrative, but short-term trading still faces a reality: when the most optimistic model has already factored AI infrastructure revenue into long-term assumptions, how much margin of safety is left in the current price.

The First Earnings Report Will Test the Valuation Anchor

It's difficult to fully dissect which type of funds the selling pressure on the first day came from in the short term. A more useful observation for investors is whether the August first earnings report and lock-up expiration window can provide the market with a new valuation anchor.

If the earnings report can offer clear signs of revenue growth, Starlink expansion, Starship progress, or AI business clues, the market will be more willing to push forward the long-term assumptions in the $300 or even higher price targets. At that time, the supply brought by the lock-up may be absorbed by additional buying pressure, and the liquidity post-index inclusion may instead become an advantage.

Conversely, if the earnings report lacks quantifiable progress and there is significant selling pressure after the lock-up, the market will reconsider how much of the current valuation is supported by scarce float and narrative hype. Passive funds that have bought in or are buying in do not mean there is no room for price adjustments in the future.

SpaceX's long-term story remains compelling enough, but after inclusion in the Nasdaq 100, its trading logic is closer to that of a super growth stock: valuation needs to be continuously proven through financial reports, lock-up digestion capacity, and business realization. The August window doesn't provide the final answer but rather the first round of testing how much of a premium the market is willing to pay for the long-term story.

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