by Peter Jones, CFA
Executive Vice President
Equity Research and Portfolio Management
Aside from the three-week extension of a brittle ceasefire in the Middle East, the news this week was focused on SpaceX’s pre-IPO filings, Kevin Warsh’s Congressional testimony, and blowout earnings among semiconductor companies.
SpaceX: Preparing for Lift Off
The long-awaited SpaceX S-1 financial disclosure filing was finally made public this week, revealing key financial details about the company ahead of its expected June IPO. SpaceX is targeting a staggering $1.75 trillion valuation, which would make it one of the top 10 most valuable companies in the world. It was suspected, and now confirmed, that justifying such an extraordinary valuation would require SpaceX to find success in unlocking enormous economic value in and outside of earth’s orbit. SpaceX recorded $18 billion in revenues in 2025. As such, a $1.75 trillion valuation implies a multiple of 100 times sales. For reference, the most expense mega-cap company on a price-to-sales basis is Palantir at 55 times.
Underneath the surface, SpaceX’s disclosures illustrate one side of the business (Starlink) already in an extremely profitable position whereas another side (xAI) is burning cash at a rate of more the $1 billion per month. The space launch business, presumably an area where investors will assign tremendous value, is profitable, however it has enormous capital investment requirements to continue sending rockets into orbit.
In our view, there is likely to be significant investor appetite for the company right out of the gates. However, the economics and fundamentals of the company will ultimately rule the day.
Regime Change at the Fed
This week in Washington, Kevin Warsh’s congressional testimony provided a blueprint for what a Warsh Fed might look like. Warsh signaled a desire for regime change in the Fed’s communication and framework. Specifically, Warsh indicated a preference for policy to have a greater focus on the inflation mandate, and a smaller focus on employment. In addition, Warsh signaled that he may place a great emphasis on “alternative” measures of inflation. Some view the combination of these comments as convenient, given these alternative measures generally argue inflation is lower than the data currently evaluated by the Fed. Many have been concerned about Fed independence form political influence. Warsh was firm in his statements that Fed independence is sacred and not at risk under his leadership.
Semiconductor Blowout
The semiconductor sector provided the week's most explosive price action. Intel led the charge with a "renaissance" quarter that sent shares surging over 25% in the wake of its Q1 report. Intel’s share price turnaround has been staggering, with shares reaching an all-time high, eclipsing the level it saw during the dot-com bubble in 1999. Beyond Intel, other key semiconductor companies benefitting from the AI infrastructure boom, namely Texas Instruments, Analog Devices and Advanced Micro Devices, all saw shares increase by more than 10% as earnings came in significantly ahead of analyst expectations.
Bottom line, the AI infrastructure investment boom has not only continued, but has, to date, actually accelerated. This investment wave has created the biggest semiconductor upcycle in history. The semiconductor industry group is now the largest portion of the S&P 500, and U.S. semiconductor companies alone have more market capitalization than China, Japan and any other global market.
Takeaways for the Week:
Details of SpaceX financial disclosures suggest that the premium valuation may depend on long-term economic fundamentals, but that is unlikely to stop investors from buying the shares in the near term
Presumptive, incoming Fed Chair Kevin Warsh indicated a shift in the structure of policymaking at the Fed during his Congressional testimony
The AI supercycle appears to be alive and well, evidenced by strong earnings reports across semiconductor companies
Disclosure: The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.
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