The more it soars, the more dangerous it becomes? The systemic risks behind SpaceX's valuation surge

Original Title: SpaceX Could Get Dangerously Systemic

Original Author: Quoth The Raven

Original Translation: Peggy, BlockBeats

Editor's Note: After SpaceX's after-hours market cap exceeded $3 trillion, this article raises a sharper question than "what is it really worth": When a company can add hundreds of billions of dollars in market cap in a single day, driven by a combination of limited float, options trading, and market sentiment, is the capital market still engaged in price discovery, or has it already become a self-reinforcing speculative machine?

The author's core judgment does not deny SpaceX's commercial prospects. SpaceX could still be one of the world's most important space infrastructure companies, and it may also have immense long-term potential. However, this article focuses on another issue: If a stock price is primarily driven by call option buying, market maker hedging, momentum chasing, and passive fund allocation, then valuation is no longer just "reflecting value" but starts to "create value." The price increase itself becomes a new bullish argument, pushing fundamentals to the sidelines.

The gamma squeeze repeatedly mentioned in the text—a feedback loop where options market makers are forced to buy the stock to hedge, further driving up the price—is key to understanding this article. Over the past few years, similar mechanisms have repeatedly appeared in Tesla, certain meme stocks, and high-momentum tech stocks. The author fears that if SpaceX replicates this path, amplified by its own narrative strength, limited float structure, and Elon Musk's personal influence, it could evolve from a high-valuation stock into a systemic variable for the entire market.

The more dangerous part lies in indexation and passive investing. When a company becomes large enough, it gets included in major indices and is passively held by ETFs, pensions, retirement accounts, sovereign wealth funds, and institutional portfolios. At that point, a bubble is no longer just a gambit for a few traders but enters the long-term asset allocation of ordinary investors. The higher it rises, the more the market cannot ignore it; and the more it cannot be ignored, the more capital is likely to continue flowing into it.

Therefore, this article is not really about whether SpaceX will become a $5 trillion or $10 trillion company. It is about a structural paradox of modern capital markets: When market mechanisms can amplify narrative, leverage, and liquidity to the point of overwhelming fundamentals, can so-called "price discovery" still hold? SpaceX is just an extreme case, but the problem it exposes may be more widespread—in today's US stock market, systemic risk sometimes starts not with the worst companies, but with the most popular, the most unavoidable ones.

Here is the original text:

"Things keep getting weirder and weirder and weirder, and eventually, they get so weird that people have to start talking about how weird they really are."

— Terence McKenna

For the past few years, I've been asking: How absurd do things have to get before we admit the stock market is fundamentally broken? Seeing SpaceX's surge after hours today, I think the answer is clear: the market has been broken for a long time. The real question is just how absurd it has to become before others notice.

SpaceX's market cap exceeded $3 trillion in after-hours trading. This means its valuation has surpassed Amazon and Microsoft. Microsoft generates hundreds of billions in annual revenue, with yearly profits exceeding $100 billion. Amazon's annual revenue exceeds $700 billion, with profits also in the tens of billions. And now, SpaceX is being assigned a higher valuation than either of them.

SpaceX's relatively limited float makes it an ideal target for a manipulative short squeeze. Near the close of after-hours trading, its stock price was close to $230 per share. In a single day, a company that still loses billions of dollars annually somehow added roughly $650 billion in market cap.

$650 billion. Not in a year. Not in a decade. In one day. And tomorrow, SpaceX options will begin trading. As I predicted earlier, I bet it could be squeezed even further.

This is what's truly unsettling. Because I've been writing for years about what happens when options activity becomes the primary driver of price action.

We've seen this playbook before: call option buyers pile in, market makers are forced to hedge, the stock rises, momentum traders chase higher, more calls are bought, and the cycle reinforces itself.

As of 10:30 AM ET, the first day of SpaceX options trading, over 500,000 contracts had already traded, representing a notional size of approximately 50 million shares.

The call option expiring in two days with a $380 strike price—the deepest out-of-the-money contract currently available—was the second most popular strike price for calls expiring this week and was the most traded strike in early trading.

At some point, price stops measuring value and starts creating it. Valuation itself becomes the bullish thesis. The company's industry and fundamentals become completely irrelevant. At that point, the market officially starts doing what it's not supposed to do.

This is why tomorrow matters. Because a company that has already shown strong short-squeeze characteristics will now have options trading. And its "sister company" has seen similar situations before.

For years, I've written that modern markets are increasingly driven by mechanical forces rather than fundamental analysis. Tomorrow could become one of the clearest cases of this judgment.

My expectation is that the introduction of SPCX options trading will not improve price discovery, but will further distort it. If aggressive call option buying emerges, market makers' hedging behavior could create a reflexive feedback loop, similar to the mechanism that drove Tesla and other momentum stocks to spectacular, yet entirely illogical, rallies over the past decade.

At that point, price movements would have nothing to do with business fundamentals and everything to do with market structure. If SpaceX does experience the kind of gamma squeeze many traders are openly anticipating, I believe it will be further proof that modern markets have become useless and dangerously toxic for ordinary people's retirement accounts.

Because markets are supposed to allocate capital. They are supposed to facilitate price discovery. They are supposed to connect valuations—however imperfectly—to economic reality. Markets should not become a self-reinforcing feedback machine that can add hundreds of billions or trillions of dollars to a company's value based solely on mechanical capital flows.

The problem isn't whether SpaceX is a good company. The problem is whether the market structure surrounding it is healthy.

Because if a company can become more valuable than Microsoft and Amazon while generating only a fraction of their revenue and profits, and could surpass Nvidia tomorrow, then what is the limiting factor? What prevents it from becoming a $5 trillion company? And what prevents it from becoming a $10 trillion company?

Image Source: Zero Hedge Twitter

If the same options-driven feedback loop that propelled Tesla's rally after late 2019 appears here, then these numbers are no longer as unimaginable as they once were. And this is the part no one wants to discuss.

Everyone wants to discuss how high SpaceX can go. No one wants to discuss what happens if it actually gets there.

If SpaceX reaches a $10 trillion market cap, that means one company is valued at roughly one-third of US GDP. It would become large enough to dominate passive indices, retirement accounts, ETFs, pension funds, and institutional portfolios. Its ups and downs would increasingly determine the performance of the entire market—all while it is still not even profitable. It would become the greatest and most dangerous hype machine in human history.

And think about what this means for Elon Musk. If SpaceX reaches a $10 trillion valuation, Musk's personal wealth would enter a range never seen in modern history. His net worth is already equivalent to 40% of all currency in circulation.

Image Source: Zero Hedge

Moreover, he isn't just richer than the second-richest person. He could soon be about ten times wealthier than the second-richest person.

The gap between Musk and other billionaires could exceed the total wealth of some developed countries. At that point, we are no longer discussing wealth creation in the ordinary sense.

What happens if SpaceX's market cap, due to some gamma squeeze malfunction, actually shoots up to $28 trillion? That's roughly equivalent to the US's annual economic output. Would people finally start questioning the market? Or would they continue to find new justifications for it all?

Because that's how every bubble in history works. Every new high is taken as proof that previous highs were too low. Every speculative frenzy is packaged as innovation—just ask "innovation expert" Cathie Wood. Every squeeze is interpreted as genius. Every warning becomes evidence that skeptics "don't understand the future."

The most astonishing thing about SpaceX breaking $3 trillion isn't the valuation itself.

It's that if it continues to rise, it will become too big to ignore. At some point, we must stop discussing SpaceX itself and start discussing the system that created it: a speculative machine that has completely detached from its original function.

The danger is that once a company reaches a large enough scale, the distortion itself becomes systemic risk. Every passive fund must hold it. Every major index depends on it. Pensions, retirement accounts, sovereign wealth funds, insurance companies, and institutional portfolios all become increasingly exposed to the same trade. The higher it rises, the more unavoidable it becomes.

This is the part no one truly understands.

If SpaceX eventually reaches $10 trillion through a combination of hype, narrative, mechanical capital flows, and options-driven feedback loops, it will no longer just be a story about SpaceX. It will become the market. Its trajectory will increasingly determine the performance of indices, ETFs, and retirement accounts across the entire financial system. The market would essentially become a referendum on a single stock.

This is how a bubble turns into systemic risk. Not when it is small enough to be ridiculed, but when it becomes so large that everyone is forced to participate. The same mechanisms driving price higher today will ultimately create the conditions for instability tomorrow. When trillions of dollars of wealth are tied to a valuation that was never really anchored to fundamentals, even a moderate correction could have consequences far beyond the stock itself.

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