SpaceX Stock Falls in Nasdaq-100 Debut as Bubble Warnings Challenge Wall Street Optimism

Key Takeaways

• SpaceX shares fell sharply on their first day as a Nasdaq-100 constituent, closing near the level where the stock began trading after its June IPO.
• The decline suggested that expected passive fund buying was not enough to offset profit-taking, valuation concerns and broader weakness in high-growth technology names.
• Jeremy Grantham, the GMO co-founder often known for warning about market bubbles, reportedly said there is a high probability that SpaceX could face a major future crash.
• Wall Street remains divided, with many brokerages still bullish on Starlink, Starship and long-term AI infrastructure opportunities, while sceptics question whether the current valuation already prices in too much future growth.

SpaceX drops despite Nasdaq-100 inclusion

SpaceX shares came under pressure on Tuesday after the company officially joined the Nasdaq-100 Index, a milestone that many traders had expected to create additional demand from passive funds.

Instead, the stock fell about 6.8% to close at $149.47, according to WSJ, leaving it slightly below the $150 level where the shares began trading on June 12. The stock remains above its $135 IPO price, but it has now pulled back sharply from its post-listing highs above $200.

The move highlights a key market lesson: index inclusion can create mechanical buying, but it does not always guarantee a sustained rally. In SpaceX’s case, much of the good news may already have been priced in before the rebalance.

The weakness also came during a softer session for technology stocks, with investor concern over stretched AI valuations continuing to weigh on high-momentum names. For traders, the reaction suggests SpaceX is now being treated less like a pure IPO story and more like a highly valued growth stock exposed to broader Nasdaq sentiment.

Passive fund demand fails to prevent selling pressure

SpaceX’s Nasdaq-100 inclusion was expected to trigger significant passive fund demand. JPMorgan estimated that the addition could generate around $4.3 billion in index-related buying, while LSEG data put the company’s index weight at about 1.34%.

That demand matters because funds tracking the Nasdaq-100 need to adjust their holdings when a new constituent is added. However, index buying is usually a one-off technical factor rather than a long-term fundamental driver.

The market reaction suggests that investors were more focused on valuation, liquidity and future profitability than on the short-term support from ETFs and index funds. With SpaceX’s public float still relatively limited, the stock may remain vulnerable to sharp moves when large buy or sell orders hit the market.

This creates a difficult setup for short-term traders. On one hand, low float and index demand can amplify upside momentum. On the other hand, the same structure can deepen downside moves when sentiment turns.

Jeremy Grantham warns of extreme valuation risk

The sell-off also came as Jeremy Grantham, co-founder of GMO and a long-time critic of speculative market excess, reportedly issued a strong warning on SpaceX’s valuation.

According to Business Insider, Grantham said there was at least a 90% chance that SpaceX shares would eventually suffer a major crash. His criticism focused on three main areas: the company’s valuation, its ambitious long-term space projects, and the market’s broader expectations for AI-driven productivity gains.

Grantham questioned whether a company with heavy losses and highly ambitious future plans should command a valuation near the top of the global equity market. He also criticised SpaceX’s projected addressable market, particularly assumptions linked to AI-related opportunities.

His warning fits into a wider debate about whether parts of the U.S. equity market are again showing bubble-like characteristics. While bullish investors argue that AI, satellite internet and reusable rockets could create enormous long-term value, sceptics argue that current prices leave little margin for disappointment.

Wall Street remains bullish on Starlink and Starship

Despite the warning from Grantham, many Wall Street analysts remain constructive on SpaceX. Several major brokerages have launched bullish coverage, citing the company’s leadership in reusable rockets, satellite communications and potential AI infrastructure applications. Reuters reported that more than a dozen brokerages, including Morgan Stanley, Goldman Sachs and JPMorgan, issued positive ratings as SpaceX entered the Nasdaq-100.

The bullish case centres mainly on two engines: Starlink and Starship. Starlink provides a clearer commercial revenue story through satellite broadband, while Starship represents a longer-term bet on lower-cost launches, deep-space missions and future industrial activity beyond Earth.

However, the challenge is timing. Much of the optimistic valuation depends on future markets that are still developing. If launch demand, satellite broadband growth or AI infrastructure revenue fails to scale as quickly as expected, SpaceX’s valuation could face renewed pressure.

For now, the stock appears caught between two competing narratives: a transformative long-term growth story and a near-term market concerned about cash burn, valuation and volatility.

What traders should watch next

For traders, the key level to watch is whether SpaceX can stabilise around the $150 area. A sustained break below that zone could increase concerns that post-IPO momentum is fading. A rebound above recent resistance, however, may suggest that buyers are still willing to defend the long-term growth story.

The next major catalysts include analyst revisions, index-fund flow data, any updates on Starlink profitability, Starship launch schedules, and broader Nasdaq sentiment. Because SpaceX is now part of the Nasdaq-100, its movements may also have a larger influence on technology-focused ETFs and index products.

The stock’s first day in the Nasdaq-100 shows that passive demand alone is not enough to remove valuation risk. SpaceX remains one of the market’s most watched growth stocks, but its share price may continue to move sharply as investors debate whether its long-term ambitions justify its current market value.