The numbers don't add up, and someone needs to say it.

Elon Musk is combining SpaceX and xAI ahead of what's being called the biggest IPO in history. The target? $1.25 trillion in market value. Bloomberg broke the news, and Wall Street is buzzing. But if you're wondering how a company with roughly $4 billion in net income gets a valuation that would make it worth more than most of the S&P 500, you're asking the right question.

Let's do the math that nobody wants to talk about. A $1.25 trillion valuation on $4 billion in earnings gives you a price-to-earnings ratio of 312. For context, that's not just expensive—it's stratospheric. Tesla trades around 70x earnings on a good day, and people already think that's insane.

Here's the problem: where does the capital come from? An IPO doesn't create value out of thin air. Someone has to buy those shares. If this is a genuine public offering, retail investors would need to pour hundreds of billions into a single stock. If it's institutional, those same fund managers who just bought the Tesla story are being asked to double down on the Musk portfolio.

The most likely scenario? This isn't really an IPO in the traditional sense. It's a shell game—existing Tesla shareholders rotate capital into SpaceX, sovereign wealth funds pile in for geopolitical access, and retail investors chase the hype on day one. The valuation doesn't need to make sense if enough people believe it will.

But let's be clear: both Tesla and SpaceX generate about $4 billion in net income. They're both "hype stocks" in the sense that their valuations depend more on narrative than fundamentals. If the combined entity is supposed to be worth $1.25 trillion, and Tesla is already worth around $800 billion, the market is being asked to add another $450 billion in value just because these two companies merged.

That's not investing. That's speculation on one person's ability to keep the story going.

Don't get me wrong—SpaceX is a real company doing real things. Reusable rockets are transformative. Starlink has actual revenue. But a $1.25 trillion valuation assumes perfection: flawless execution, zero regulatory headwinds, and sustained growth in markets that don't exist yet. Oh, and it assumes investors have unlimited appetite for Musk-branded equity.

The smarter question isn't whether SpaceX deserves this valuation. It's whether the capital markets can even absorb it. If this IPO happens and the stock holds, it tells you more about how broken price discovery has become than it does about SpaceX's fundamentals.

Watch what happens when the roadshow starts. If the valuation quietly gets trimmed, you'll know Wall Street couldn't find enough buyers. If it goes through at $1.25 trillion, buckle up—because we're no longer pricing companies. We're pricing belief.

And belief, as every retail investor eventually learns, doesn't pay dividends.