Every generation produces a handful of companies that seem capable of changing the world. The challenge for investors isn't just identifying them. It's deciding whether it is a great company to own shares in and if so, what price to pay for them.
There is no shortage of opinions about SpaceX. Depending on who you ask, it is either the greatest private company ever built or the latest example of irrational exuberance. The truth is probably somewhere in between. It has transformed the economics of launching rockets, become a critical partner to governments, built a rapidly growing global communications network through Starlink, and continues to pursue one of the most ambitious commercial visions of our lifetime. With SpaceX now public and companies such as OpenAI and Anthropic expected to follow, investors are about to face one of the biggest waves of technology IPOs in history. The critical question isn't just whether these are great companies. It's whether they are great investments at today's valuations.
This is an important distinction that investors often overlook, especially during periods of technological change. Transformative innovations attract huge amounts of capital. Railways, electricity, the internet and now artificial intelligence have all experienced periods where money flowed faster than opportunities could absorb it. Some of that capital funded businesses that changed the world. Others disappeared almost as quickly as they arrived. Today's AI ecosystem is attracting capital at very high valuations, but that should not automatically be confused with the quality of the underlying technology. Great technologies can coexist with expensive prices. The challenge for investors is separating the two.
The valuations are extreme in my opinion. SpaceX is currently valued at around 50 times annual revenue and has traded at more than 100 times, while OpenAI and Anthropic are valued at roughly 34 and 20 times revenue respectively. Those aren't multiples of profit. They're multiples of revenue. None of these businesses are generating the level of profits that would traditionally justify valuations of this magnitude. Investors are paying for what these businesses might become over the next decade, not what they earn today. That means an enormous amount of future success is already reflected in today's prices.
The SpaceX IPO also highlights how much the world of capital raising has changed. Twenty years ago, businesses typically listed much earlier because they needed access to capital. Today, the largest private companies can raise tens of billions of dollars without ever listing on a stock exchange. Deep pools of venture capital, sovereign wealth funds and institutional investors are prepared to fund these businesses for far longer than was previously possible. The result is that much more of the value creation now occurs while companies remain private. For decades, ordinary investors could participate in much of a company's growth after it listed. Increasingly, that is no longer the case. Many of the largest gains are now captured by founders, employees and private investors long before an IPO takes place.
That changes the investment equation. Increasingly, an IPO is less about raising capital to build the business and more about providing liquidity for founders, employees and early investors who have backed the company for years. None of that is inherently negative, but public market investors need to be mindful that they are entering at a very different stage of the journey. SpaceX shares were issued at around US$135, surged to more than US$225 as excitement built and have since fallen below the issue price and now sit at around US$116. The underlying business didn't materially change during that time. The market's expectations and hype certainly did. It's also worth remembering that many founder, employee and early investor shares remain subject to lock-up and vesting arrangements. In other words, they can’t yet sell. As those shares become tradeable over time, supply and demand dynamics may change again, regardless of the quality of the underlying business.
SpaceX may well justify every dollar of its valuation over the coming decade. OpenAI and Anthropic may do the same if and when they reach public markets. They could become defining companies of this century. But that doesn’t mean everyone should invest, or that they are appropriate investments. These are not investments for the faint of heart. Equally, they may prove that even extraordinary businesses can produce ordinary investment returns if purchased at too high a price. That is not a criticism of any of these companies. It’s a reminder that finding great companies is only half the job. Paying a fair price for them is what ultimately determines long-term returns.