Paul Krugman Compares SpaceX To Trump Crypto Trade, Says Winners May Be Those Who Exit Before The 'Bottom Inevitably Falls Out'

Krugman said SpaceX has become a bet on Musk's ability to keep generating excitement around futuristic projects.

• Comparing SpaceX's post-IPO surge to the rally in cryptocurrencies following Trump's 2024 election victory, Krugman said both trades were driven by expectations that may prove difficult to justify over time.
• The economist believes that SpaceX is essentially all about hype, while terming it a “meme stock.”
• Not everyone shares Krugman's concerns, as Sequoia Capital partner Shaun Maguire said Tuesday he plans to hold his SpaceX shares "forever" following the company's blockbuster IPO.

Nobel Prize-winning economist Paul Krugman compared Space Exploration Technologies Corp.’s (SPCX) soaring valuation to the "Trump crypto trade," arguing that the Elon Musk-led company's $2.6 trillion market capitalization is being driven more by hype than fundamentals.

Krugman also warned that the biggest winners may be investors who sell before enthusiasm fades.

This comes a day after SpaceX’s market cap soared past Amazon.com Inc.’s (AMZN) and briefly eclipsed Microsoft Corp.’s (MSFT), following a blockbuster Nasdaq debut last week.

SpaceX shares were down more than 3% in Wednesday’s opening trade, while Microsoft shares were down nearly 2%. SPCX was among the top trending tickers on Stocktwits at the time of writing.

Krugman Says SPCX Is A Bet On Musk

Krugman argued that SpaceX's valuation reflects investor faith in Musk's ability to keep generating excitement around ambitious future projects rather than the company's current financial performance.

Comparing SpaceX's post-IPO surge to the rally in cryptocurrencies following Trump's 2024 election victory, Krugman said both trades were driven by expectations that may prove difficult to justify over time.

“So the moral here is that SpaceX is essentially all about hype. It is, in effect, a $2.75 trillion meme stock. The only winners will be those who got in early, stoked a market frenzy, and exit before the bottom inevitably falls out,” Krugman added.

Why Krugman Compared SpaceX To The 'Trump Crypto Trade'

Krugman argued that SpaceX's rally resembles the surge in cryptocurrencies following Trump's 2024 election victory. At the time, many investors bet that a crypto-friendly White House would create a more favorable regulatory environment for the industry.

According to Krugman, those expectations helped drive crypto valuations sharply higher before sentiment cooled as the bump from Trump's support weakened.

Sequoia Partner Vows To Hold SPCX Forever

Not everyone shares Krugman's concerns. Sequoia Capital partner Shaun Maguire on Tuesday pledged to hold his SpaceX stake "forever" after the company's blockbuster IPO during an interview with Bloomberg.

“This is the biggest vision, the biggest mission of any company in history, going out to the biggest markets of any company in history with the biggest moat,” Maguire added.

What Retail Traders Think About SPCX Stock

Retail sentiment on Stocktwits around SpaceX trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

The S&P 500 ETF (SPY) is up 26% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 39%.

The iShares A.I. Innovation and Tech Active ETF (BAI) is up 88% during this period.

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