This week’s data had a clear headline. SpaceX priced the largest IPO on record, raising roughly $75 billion at a valuation near $1.75 trillion, then jumped on its first day of trading. Underneath that, the economic picture held up: nonfarm payrolls rose for a third straight month, the Atlanta Fed’s GDPNow model moved its Q2 estimate up to 3.3%, and the unemployment rate held at 4.3%. In the markets, the Magnificent 7 continued to trail the rest of the S&P 500, the VIX pushed above 20, and both gold and silver erased their year-to-date gains. The roundup also looks at what the SpaceX debut may signal about today’s market and whether Treasury-backed stablecoins could become a new buyer for U.S. government debt.
SpaceX
This week gave us a live example of just how much capital is being pulled toward this theme, and the SpaceX IPO is a good lens for understanding it.
SpaceX priced its IPO Thursday night at $135 a share, raising roughly $75 billion at a valuation of about $1.75 trillion. To put that in perspective, the previous record holder for the largest IPO ever was Saudi Aramco in 2019, which raised about $25.6 billion. SpaceX raised nearly three times that, in a single offering, for a company that lost almost $5 billion on a GAAP basis in 2025, even as revenue grew 33% to $18.7 billion.
The story underneath the story is Starlink. Starlink generated $11.4 billion in revenue and $4.4 billion in operating profit last year, with a 63% EBITDA margin, and it’s the only part of the SpaceX business that’s currently profitable. The rocket business and the Starship development program are still cash consumers, and the xAI division, which merged into SpaceX earlier this year and makes the Grok AI models, posted a $6.4 billion operating loss in 2025. So what the market priced at $1.75 trillion this week is really a bet on Starlink’s growth trajectory (subscribers roughly doubled from 4.5 million to over 10 million in just over a year), carrying the rest of the business through its investment phase.
Then there’s the index mechanics, which is really why this matters for anyone holding a broad index fund, whether they’ve ever thought about SpaceX or not. SpaceX is expected to enter the Nasdaq 100 within about two weeks of its listing, which, by some estimates, could force $22 to $27 billion in mechanical buying from every fund that tracks QQQ. MSCI inclusion is targeted even sooner. None of that buying has anything to do with valuation. It’s simply the funds required to hold the index and do what their mandate requires. This is the same mechanism that has driven so much of the concentration story I wrote about in Cycles, Concentration, and Consequences, just playing out in real time with a single company.
Update, Friday afternoon 2 pm ET: SpaceX (ticker SPCX) opened for trading around noon and is up roughly 38% from that $135 IPO price, putting shares around $186 and pushing the implied valuation from about $1.75 trillion to somewhere in the neighborhood of $2.4 trillion. For context, that’s a single-day gain of roughly $650 billion in market value, more than the entire market cap of most of the companies in the S&P 500.
A few things stand out. First, this tells you something about the relationship between supply and demand. With only about 4% of shares actually floating, and roughly 30% of the deal allocated to retail, a 38% pop on day one suggests the deal could have been priced meaningfully higher and still cleared. Second, it makes the index inclusion story even bigger than I described above. If SPCX enters the Nasdaq 100 and gets MSCI inclusion at a $2.4 trillion valuation rather than $1.75 trillion, the mechanical buying from index funds scales up accordingly, somewhere in the range of $30 billion or more by some estimates, all of it indifferent to price.
Third, and this is the part I keep coming back to, a 38% first-day pop on a company that lost nearly $5 billion last year is itself a data point for the broader argument I’m making in this letter. This is what an overowned, overleveraged, momentum-driven market looks like in real time.
None of this means SpaceX isn’t a remarkable company; it is. I’m excited, I’m interested in building a position over time. But the gap between “remarkable company” and “remarkable price” is exactly the gap I’d encourage you to keep in mind, both for SPCX specifically and for the index funds that will soon be forced to own it at whatever price the market decides today.
The offering raised about $75 billion. That isn’t a record. That is more than double Saudi Aramco’s prior record, the $29 billion deal in 2019.
So what did the action actually tell us? Three things.
First, the appetite for the AI story has not died; it has simply moved venues. Money that fled semiconductors during the prior week’s chip wreck found a fresh, even bigger AI vehicle to chase. With SpaceX now housing the former xAI unit and pitching data centers in orbit, the enthusiasm was unsurprising.
Second, the broad index barely budged on the spectacle. The S&P added only half a percent Friday, even as a $2 trillion company traded at record volume, which suggests the enthusiasm is concentrated, not contagious. Of the 550 million shares issued for the IPO, 517 million changed hands on the first day. In other words, almost every share that was allocated in the IPO was sold.
Third, and most important for the weeks ahead, a flood of supply is on the way. As discussed in that article, the well-received SpaceX clears the runway for the rest of the queue, and OpenAI and Anthropic are reportedly next. When the most prized private names all rush the exit at once, history says pay attention to who is selling.
US Economy
The Atlanta Fed’s GDPNow model is now tracking Q2 GDP at 3.3%, up from 3% on June 1.
Nonfarm payrolls rose for a third consecutive month in May, well above consensus estimates. Data for the previous two months were revised up by a combined 93,000. Payroll growth increased the most in leisure and hospitality and local government, perhaps reflecting an early impact from World Cup hiring. Sectors with high AI adoption continued to shed jobs, in sharp contrast to the rest of the private sector. The three-month average job gains have risen sharply.
Goldman’s estimate of underlying trend job growth has risen to 131,000, above the break-even rate. The unemployment rate held steady at 4.3%. The civilian labor force participation rate held steady, although the rate for 25- to 54-year-olds ticked up. The underemployment rate (U6) declined by 10 bps to 8.1%.
Used vehicle prices edged up in May. Consumer credit posted another strong increase—with revolving loans (credit card balances) rising at the fastest pace since late 2023—amid mounting cost-of-living pressures. US office vacancies continue to climb.
Five years since the post-pandemic reopening, people are still not going to the office as much as they used to.
The US Weekly Economic Index signals the strongest growth since August 2022.
What are Americans most worried about?
The US now leads global oil production after more than doubling output over the past decade.
Who can you give blood to?
US Stock Market
Mag 7 stocks have underperformed the rest of the S&P 500 members this year.
The VIX index jumped above 20. Analysts continue to raise their hyperscaler capex expectations.
Gold has erased all its year-to-date gains.
Silver fell below its long-term support.
The Fed Using Stablecoins – Strategy for Debt Reduction?
The U.S. government is approaching $40 trillion in debt, running deficits of nearly $2 trillion a year in an economy that isn’t in recession. The interest expense on that debt, what we pay just to service it, is closing in on $1.3 trillion a year. Roughly one out of every four dollars Washington collects now goes toward interest expense alone, before a dollar is spent on anything else. And with Treasury rates rising, that expense is going up from here. I see very little political will in Washington, on either side, to address the problem. The incentives remain short-term, even as the consequences become increasingly long-term.
Where is the money coming from? The Fed has been printing it. Money creation – not tariffs, and not corporate greed – is the underlying driver of inflation and higher rates over time. If you want a single number that tells you whether this stays a slow burn or becomes a crisis, watch the 10-year Treasury yield. That yield is the match. The debt and deficit are the fuse. The bond and stock markets are the bomb. So far, the match hasn’t touched the fuse, but it’s getting closer, and this week’s headline-driven swings show how sensitive that fuse has become.
A few things, as I see it, could change this picture without a painful adjustment. The first is AI: if it meaningfully lifts productivity and replaces enough labor, it could be disinflationary enough to offset the effects of money creation on prices and increase government tax revenue (a growth accelerator). The second is Treasury-backed stablecoins, which could become a genuinely new source of demand for U.S. debt just as traditional buyers, foreign central banks especially, grow less reliable.
Productivity gains from AI and demand for stablecoins may be the eye of the needle that Treasury Secretary Scott Bessent is trying to thread, with a Fed chairman in Kevin Warsh who sees the problem the same way. Whether that needle is wide enough is, to me, the most important question for investors over the next few years.
It’s out there thinking, and at this point, a crypto step is a little bit above my pay grade. But here is what I know: Speaking at the Treasury Market Conference, Bessent described stablecoins and money-market funds as playing a growing role in shaping future U.S. debt demand, marking the first time a Treasury Secretary has publicly positioned stablecoins as a pillar of debt financing. More specifically, Bessent has suggested that Treasury could rebalance its issuance toward more short-term T-Bills to meet the demand that stablecoin reserves create, and has reportedly engaged directly with Tether and Circle on this. He’s also cited analysis suggesting a fully operational federal stablecoin framework could generate up to $2 trillion in incremental Treasury demand, and he’s publicly predicted the stablecoin market cap could reach $3 trillion by 2030, roughly a tenfold increase from current levels. Source: TheStreet
I think this is part of the Bessent / Warsh plan. And $2 trillion seems small if our deficit spending is that much per year, but we’ll see. We just can’t yet know.
Great Quotes
“I place economy among the first and most important virtues, and public debt as the greatest of the dangers to be feared.”
– Thomas Jefferson
Picture of the Week
Bonzai Rock in the fog at Lake Tahoe, NV
All content is the opinion of Brian Decker
