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Elon Musk may seem to have the Midas touch when it comes to business. With his track record of beating the odds and creating successful businesses that can disrupt entire industries, it is tempting for investors to bet on any company that has his name attached to it.

Past success, however, doesn't guarantee future results. And there are several reasons SpaceX might not live up to expectations after its initial public offering (IPO) planned for next month. Let's dig deeper into how unprofitable artificial intelligence (AI) exposure and a highly speculative business strategy could cause the stock to underperform after its public debut.

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SpaceX could become the largest public stock debut in history with an expected valuation of $2 trillion. To put that number in perspective, it would make SpaceX worth more than all but six public companies on the planet. Furthermore, SpaceX's potential market capitalization isn't well supported by its business fundamentals.

This month, SpaceX filed its S-1 with the Securities and Exchange Commission (SEC). This document is required in the pre-IPO process, and it gives the market its first peek inside the financials of the privately held company.

In 2025, SpaceX's revenue jumped 33% year over year to $18.7 billion, which is quite impressive for a company of its size. On the other hand, expenses (particularly for research and development) are also ballooning at an even faster clip, which led to operating income collapsing from a positive $466 million to a loss of $2.6 billion in the period.

Investors shouldn't be too surprised that a rocket company is spending huge amounts on R&D. After all, this is a complex technology with huge regulatory and testing requirements. However, a rising portion of SpaceX's spending is going toward a much more speculative and arguably less beneficial part of its business -- generative AI.

According to the S-1 filing, SpaceX's AI segment generated an operating loss of $6.36 billion in 2025. This figure gets even more alarming when you remember that this happened before the acquisition of xAI in February 2026. The new subsidiary will likely make the cash burn worse because of the need to build and maintain data-center capacity and keep up with rivals like OpenAI and Anthropic.

There are signs that xAI may already be falling behind. Although the company claims capacity and energy are its primary constraints, lack of demand may play an even bigger role. The company is actually renting out excess capacity to rivals, with Anthropic reportedly paying $1.25 billion per month for access to xAI's Colossus data centers.

In the near term, this deal sounds like good news for SpaceX because of the enormous revenue opportunity. However, it represents training and inference capacity that won't be going to the company's in-house large language model (LLM) Grok. Furthermore, Anthropic can exit the deal before it expires in 2029. And over time, SpaceX's data centers could struggle to compete with hyperscalers like Amazon, which plans to make $200 billion in AI-related capital expenditures this year alone.

Elon Musk's proposed space-based data centers could eventually give the company an edge by enabling access to abundant solar energy and dramatically reducing cooling costs. But this strategy could run into problems ranging from space debris to maintenance challenges and should not be seen as a realistic business plan with current technology. Despite his entrepreneurial success, Elon Musk has developed a track record of overpromising and underdelivering. And the SpaceX IPO is shaping up to be one of the biggest disappointments yet.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

Prediction: SpaceX Stock Will Crash This Year. Here's Why. was originally published by The Motley Fool