Just one month ago, SpaceX had surged nearly 50% during its first three trading days after listing, with its market capitalization briefly exceeding $2.6 trillion. Since then, its valuation has fallen from $2.6 trillion to $1.75 trillion, wiping out approximately $860 billion in market value in just one month. Even more striking is the performance of SpaceX's newly issued $25 billion bond. Since it began trading on June 24, the bond price has continued to decline, pushing its yield to as high as 7.5%—a level comparable to junk bonds.

Short sellers are rapidly building paper profits. According to data from S3 Partners, investors betting against SpaceX have accumulated unrealized gains of approximately $3.88 billion. Around 181 million SpaceX shares are currently sold short, representing roughly 28% of the company's public float—an unusually high level for a newly listed company. Daniela Hathorn, Senior Market Analyst at Capital.com, said the pullback reflects several factors working together: "Profit-taking by investors, a reassessment of valuation, and the unwinding of extremely bullish positioning following one of the most closely watched IPOs in recent years."

The Bond Market Is Pricing SpaceX Like a Junk Bond Issuer

SpaceX issued $25 billion of bonds in June with a maturity date in 2056. Since trading began on June 24, the bonds have steadily declined in price, driving the yield up to approximately 7.5%. Dec Mullarkey, Managing Director at SLC Management, described the yield as "comparable to junk bonds." Although SpaceX carries investment-grade credit ratings of Baa1/BBB, the bond market is effectively pricing the company's debt with a risk premium close to that of speculative-grade issuers.

Earlier data also showed that SpaceX's 10-year bond yield climbed to nearly 6%, with its spread over U.S. Treasuries widening to more than 1.6 percentage points. Credit spreads on its longer-dated bonds due in 2046 and 2056 expanded to 1.93 and 2.01 percentage points, respectively. By comparison, the average spread for BB-rated high-yield bonds stands at approximately 1.67 percentage points, meaning SpaceX's long-term bonds are now trading at spreads wider than some junk-rated debt.

Bond investors and equity investors evaluate companies differently. Equity markets can reward compelling growth narratives, while bond investors focus primarily on a company's ability to repay its obligations. When an investment-grade bond begins trading at yields comparable to junk bonds, it suggests the market's assessment of the issuer's credit risk has materially deteriorated.

Three Key Factors Weighing on the Stock

The first concern is the cost of AI infrastructure. Mullarkey put it bluntly: "Investors are increasingly realizing that the SpaceX story is closely tied to its xAI ambitions. As markets become more cautious about the costs and returns of large-scale infrastructure projects, SpaceX's plans appear too distant." The company's massive investments in AI computing infrastructure require enormous capital, while the timing and certainty of future returns remain unclear.

The second issue is growing skepticism over the sustainability of its debt-financed growth model. Last month, SpaceX turned to the bond market to raise $25 billion, joining a growing list of technology companies issuing debt to fund AI infrastructure expansion. Whether these enormous capital expenditures will ultimately generate sufficient returns has become one of Wall Street's biggest debates.

The third concern is the disconnect between fundamentals and valuation. SpaceX reported a net loss of $4.9 billion last year, while many of its ambitious long-term projects remain unproven. Steve Sosnick, Chief Market Strategist at Interactive Brokers, commented: "A stock trading a few dollars below its IPO price isn't necessarily a disaster, but SpaceX attracts enormous attention and carries significant psychological importance for investors."

More importantly, downside risks may not yet be fully reflected. SpaceX is expected to release its first quarterly earnings report in the coming weeks, while the first phase of its IPO lock-up period is also set to expire. Once early investors are permitted to sell their shares, the stock could face additional selling pressure.

Following the earnings release, the first stage of the IPO lock-up expiration will allow eligible employees and certain early investors to begin selling part of their holdings. Considering that approximately 20% of the $75 billion raised during SpaceX's June IPO came from retail investors, any further deterioration in market confidence could trigger even stronger selling pressure than anticipated. Meanwhile, investors are also closely watching SpaceX's 13th Starship test flight, which could take place as early as Thursday this week. The outcome of the launch is widely expected to serve as another key catalyst for market sentiment.

Despite the recent weakness in the share price, Wall Street remains broadly optimistic about SpaceX. With the post-IPO analyst quiet period now over, investment banks involved in the listing have begun publishing a wave of bullish research reports. More than 80% of analysts currently rate SpaceX a "Buy," with an average price target of approximately $238, implying roughly 78% upside from current levels. Raymond James has issued the most optimistic target on Wall Street, projecting the stock could reach $800 per share.