Prof G Markets - SpaceX Stock Just Crashed — Here’s Why

Episode Date: June 24, 2026

Ed Elson is joined by Gil Luria to discuss the global tech selloff and how SpaceX is fueling AI fears. Then, Arin Dube joins the show to break down his research on minimum wage increases and what it reveals about the path towards raising the federal minimum wage. Finally, Ed checks in on his SpaceX prediction. Gil Luria is the Head of Technology Research at D.A. Davidson. Arin Dube is the Provost Professor of Economics at the University of Massachusetts Amherst and author of The Wage Standard: What’s Wrong in the Labor Market and How to Fix It.  Subscribe to the Prof G Markets Youtube Channel  Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Meet the model at C-E-L-O-N-I-S.com slash context. Money markets, Matt. If money is evil, then that building is hell. The show goes up. Welcome to Prof.G Markets. I'm Ed Elson. It is June 24th. let's check in on yesterday's market vitals.

The major indices declined as tech stocks dropped around the world. More on that at a moment. Meanwhile, oil continued its decline, and finally the dollar hit its highest level since November on growing expectations for rate hikes this year. Okay, what's happening? Tech stocks are selling off, and the pain is hard to ignore. So far this week, the NASDAQ 100 is down roughly 4%.

meaning that the index has shed over a trillion dollars in the last two days alone. Chipmakers are among the hardest hit, with an index of semiconductor companies dropping 8% yesterday. The route has gone global too, with Asian stocks taking a steeper dive, South Korea's Kospi is down 10% from near-record highs. But the biggest drop we've seen was SpaceX. The company issued a $25 billion bond offering

to finance its AI operations. And over the past three days, the stock has fallen around 20%. So for more on this latest drawdown in the tech market, we're speaking with Gil Luria, head of technology research at DA Davidson. Gil, good to see you. A lot of pain in the tech sector, the chip stocks especially, AMD's down 5% this week, Nvidia's down 5.5% TSM and Broadcom down 8%. What is going on here? Why are investors so concerned right now? I characterize it as a lot of volatility. The dispersion and outcomes for next year is bigger than it's been in a while.

If you think about it, if AI goes well, GDP in the U.S. may grow 5% next year. If AI rolls over and the cycle is over, GDP may only increase by 1 or 2% next year. Usually we're trying to figure out if GDP is going to grow 2.8 or 3.4. to right now the range of outcomes is really big. So anything, anytime something happens in AI that makes people more optimistic, these semi-stocks continue to run. And anytime there's a sense in the market of maybe we're close to the top, then we get these big corrections. So most of what we're seeing right now is just tremendous volatility. What do you make of what's happened with SpaceX here? I mean, we talked about it last time. I think we talked before it

went public, or at least maybe in the first few days. and it's been kind of a stunning drawdown. I'm not personally that surprised by it, because, I mean, I kind of thought this had to happen eventually, but what do you mean? You were very vocal about that. You were very vocal, and I think that was very helpful to investors going in, that you spent a few days preparing investors

that there's going to be a first day pop, which happened, and then the stock may come down from there. And that's happened without all those things that we talked about last week, which is there's going to be shares unlocked, and there's going to be a lot of activity around index inclusion and non-index inclusion. So another place where we're going to see even more volatility, but thankfully, you did prepare at least your viewers and listeners for this outcome.

On that point, we haven't seen those lockup expirations yet. I mean, this is, as you say, it seems to be just pure volatility, and it seems to be triggered by this $20 billion dollar bond. offering to, I guess, finance the AI build-out? I mean, if we were to sort of draw that to its logical conclusion, I assume that means something like investors are worried about the fact that they need to raise more money, to spend more money on AI. Where is the return going to come from? Which goes back to AI bubble concerns. Where is the ROI on this technology? Do you think that that is sort of fueling the anxiety here? Is that what is ultimately triggering people?

decision to sell? Yeah, all these things are contributors to this. I mean, they just went out and raised $85 billion in equity capital, and now they're raising another 25 of debt. Now, some of it is to pay other loans. Some of it may not be. Either way, they need to invest very substantially in this AI compute. Now, to be fair to them, this is a business that's in tremendous transformation right in front of our eyes, right? From a business that had most of its revenue from Starlink and then about a quarter of the revenue from space exploration. Now, with the anthropic Google and reflection contracts, most of their revenue is coming from a neocloud business, from any out data center capacity to AI labs. So their business is completely different than it was a year ago.

This business, the business that is now their biggest business, this neocloud business, is incredibly capital intensive. So they do need a tremendous amount of capital. Now, Part of this is they're monetizing existing data centers, but they also want to build a lot more data centers, not to mention they want to build some of them in space. What do you make of what's happened to big tech in the sell-off as well? Because they've really been dragged into this. Alphabet had a pretty significant sell-off. That was maybe a different story because a couple of their AI researchers left the company and went over to a competitor, which got a lot of investors concerned. But also, Amazon's down 3% this week. Meta down 2%.

Microsoft down as well. What do you make of big tech valuations and what is their role in this story? So the sentiment around those companies is they're spending too much money. They're not going to get the return. We would rather invest in the companies that they're spending on, so mostly chip companies as opposed to the companies that are spending their cash flow on those chips. And that's when the market is reacting to now. But I would say the Google changes are actually very, very important. The two people that left Google for the Frontier Labs are two of the only people in the world that

can understand AI right now. You can really count the people in the world that can figure out how to develop a better model is probably less than 100 people globally, and the two that left Google are probably top 10. So the fact that they said

Google is so bureaucratic that Google DeepMind will not lead us to superintelligence, we should go to Open AI and Anthropic, is actually a sign that there's maybe cracks in this notion that Google is the AI winner, which is how we got from a stock in 180 to stock over 350. So that's specific to Google, but broadly speaking, investors don't believe the returns are coming. It doesn't matter that Amazon, Microsoft, and Google are telling us, of course their returns are coming. We've already

sold this data center capacity. We know a cost. We know we have a markup. We know I have a return. investors are just not buying that right now. How do you sort of justify or explain what's going on in terms of just the delta between some of the valuations that we're seeing in AI, which are certainly overpriced? I mean, SpaceX would be sort of ground zero, the perfect example, trading at, you know, 100 times revenue, last year's revenue. But then there are also companies like Microsoft, like meta, and their price to earnings multiples are historically quite low right now.

I mean, how do we sort of make sense of this market if you have this massive difference between all of these different players in AI? The market is being inconsistent. The valuation of Nvidia, Microsoft, Micron, and to some extent Amazon is a valuation that implies that this AI thing isn't going to work out and we're at the peak of the cycle and it's going to roll over next year. The valuation of cerebrus and ACHLO and all these optical companies implies, that an Intel implies that the cycle will continue through 2030. So the market is being inconsistent right now because the people that don't believe that in AI are unwilling to buy those big companies,

but then the people that do believe in AI are only buying the marginal AI participants. We see that as an opportunity to buy great companies like Microsoft, like Nvidia, like Micron, at attractive valuations, because if this isn't peak cycle, if this AI thing actually works out, those stocks will be a lot higher in a year or two.

Do you have any concerns about what we're seeing in the macro environment, specifically, I mean, it's kind of amazing and remarkable the fact that what's happening in Iran does ultimately affect a lot of these names because ultimately it could mean higher interest rates if we do see rate hikes, which is probably one of the biggest anxieties

for investors on Wall Street right now. And no one seems able to agree. Are you looking at interest rates? Are you concerned about interest rates, especially as it relates to those names and whether or not they are buying opportunities? Oh, absolutely. And right now, again, the market is of the mind that Iran will not be an issue going forward. Therefore, oil prices will remain low, inflation will remain low, and we will not need to increase

interest rates. But that, obviously, as we've noticed over the last four months, can change very quickly. And so we absolutely have to keep an eye on that because that would be the major impact at a cyclical level. And then the AI trend we're talking about is a secular trend, but overlaid on all that is a cyclical aspect of it, which is very much impacted by inflation and the need to raise interest rates possibly.

Gil Luria is Head of Technology Research at D.A. Davidson. Gil, really appreciate your time. Thank you. Thank you. After the break, a closer look at the minimum wage. And for even more markets insights, you can subscribe to my weekly news, letter Simply Put at simplyput.profgemedia.com.

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30 states have increased their minimum wage. while 20 still used the federal floor of $7.25. Our guest today realized that a natural experiment was going on across the country, so he asked what happened to pay employment and local economies where wages went up. And what can those real world experiments tell us about whether and how the federal government should raise the minimum wage today? Joining us to discuss his findings were speaking with Aaron Dubay, provost professor of economics at the University of Massachusetts, Amherst,

and author of the wage standard, what's wrong in the labor market and how to fix it. Aaron, thank you so much for joining us on the show. You have been studying minimum wage policies across the country. You pointed out a simple and important point, which is that we've experimented with this at the state level. What were your findings? You know, as I like to sometimes say,

the silver lining of dysfunctional policymaking is that they provide us with natural experiments. So it's not a great way to set federal minimum wage to let it not change for over 17 years, but it did mean that 30 states now have raised their minimum wage. On average today, those 30 states have something a little over $14 an hour minimum wages. In contrast, the other 20 states,

the minimum wage remains 725. That is so low, by the way, that it's essentially like not having a minimum wage because very few people actually get paid that little. So we're basically, for the first time since the 1930s when we first introduced the minimum wage, we have like a little less than half the country with no minimum wage versus the other half, sometimes with fairly strong minimum wage, maybe even the levels of close to UK or France. So this is a contrast. And so what I did is to look to see, this is really simple. You know, sometimes getting causal evidence of any policy or something like that,

which we economists, you know, spend a lot of time trying to figure out. It's hard. It's hard work. And people disagree, et cetera. But this is one of those cases where it's actually pretty straightforward. You just look and look at these 30 states. Look at these 20 states. Just plot what happens to their wages.

Plot what happens to their share of people who are working. And it turns out that. that tells us a pretty compelling story. So one of the things that we hear a lot about on why we shouldn't raise the minimum wage is that it's going to be a problem for employment, that if you basically force employers to pay employees more, then fewer people will be employed. What did your data find on that front? Yeah.

So just as a way of thinking about this, if we have a really well-functioning market, labor market, where companies are, you know, really competing hard for workers. If suddenly the government comes in and sets wage even higher than what companies are paying, some jobs will be lost because companies are just not going to be willing to hire those individuals. At the same time, if the market is not quite working that way, and the market has, here's a funny word that economists use, manapsony power, which means that employers of some degree of choice, should I pay a higher wage and have lower quits and easier recruitment, or should I pay a lower wage and save on labor costs, but then have higher quits and, you know, harder time recruiting.

In such a market, a higher minimum wage could end up not killing jobs, but killing vacancies and reducing turnover. So then it becomes an empirical question. And so here's what we found. So when I look at this, 2010 to 2025, okay? a broad set of 15-year period. In the states that raise their minimum wage, if you take the most impacted sector, that's restaurants. Okay, this is the low-wage sector,

a sizable portion of the minimum wage workforce work at restaurants. Restaurant pay in these 30 states today is maybe about, on average, like 8 or 9% higher than in the other 20 states. Okay? Then that it was, say, compared to 2013 before this gap emerged. So very clear wage growth in these 30 raised states

compared to the 20 states that stayed put. What happened to jobs? We can look at restaurant jobs per capita. It is virtually the same today as it was in 2013 in these two states. So clear increase in wage? Pretty much sideways change in jobs in the most highly impacted sector restaurants. In other words, the main argument against the minimum wage,

which is that it causes lower employment, we have evidence that is actually not true, at least in the states that we have looked at, which makes me... That's right. Yeah. It makes me wonder, is there any valid argument against the minimum, raising the minimum wage?

And it doesn't seem to be the case. There's a number of things to think about. So one thing I will say is that, by the way, this is the simplest comparison, but of course we can make fancier comparisons and other work that I have done. I've said, well, maybe there are different things going on. We can compare just neighboring counties. Just one side of the border raised it, another didn't. So very similar otherwise. And I show this in the substack post.

You can compare the neighboring counties across the state line. Again, clear change in wage? Absolutely no change in relative employment in the two-sacept. sides. And there are other things you could do. You could look at broader set of industries, of low wages, et cetera. And the story doesn't change. Now, so how do employers actually absorb this? And that actually gets to an important thing to recognize. And so I talk about this in the book, called the three P's. So first of all, there's some productivity offset. Higher wage does increase productivity in a couple different ways. And that doesn't pay for itself, but it does offset some of the

cost in higher wages. Then there's some reduction in profits, but then the final piece is prices. And here, it is true that a higher minimum wage does lead to somewhat higher prices for particular goods and services, particularly like a burger may cost a bit more. If you look at the overall cost of living in a estate, it is not visibly affected by a minimum wage, but particular things may cost a bit more in order for lower wage workers to have a higher pay. So that's the kind of the way we can think about how the minimum wage actually gets absorbed. You know, most people tend to sort of support having a higher minimum wage when understanding these are some of the, you know, tradeoffs that we may face. What do you think is the next step here?

Because it seems like we have a solid body of evidence demonstrating that all of the fears that we had that some may have had around the minimum wage being raised are not actually true. And now, I mean, we have clearly a cost of living crisis in the country, increasingly an affordability crisis. It seems like this might solve a lot of those problems. Simply raise the federal minimum wage, and therefore we would see more wage growth as demonstrated in the evidence that you've laid out, especially among the lowest earners. And perhaps it might solve our problems. I mean, is the next step taking this to the federal government and raising the federal minimum wage? It's certainly the case that there's that lack of wage growth is a big part of the affordability crisis.

And so finding ways of raising wages is key. And that's why sort of I wrote the book. And one of the pillars that I argue is exactly raising the minimum wage. The other one, by the way, is full employment, which also plays a very important role in helping giving more leverage to workers. But when we think about raising the minimum wage, at this point, the federal minimum wage has been staggered. like we said for 17 years. So it is absolutely critical that we do raise it. You know, it's actually it's something that there's a broad base of support in this country for doing this. And the problem is really in Washington. And so, of course, we can keep raising more state minimums.

That is something that, you know, I think we'll probably continue to see efforts. But at the end the day, not all states you can actually put this on the ballot. And sometimes there's, you know, different factors that affect what kind of what legislatures are going to do. And this is why it's really critical for the federal government to do its job and actually have a minimum wage. And the key thing will be the next time we raise the federal minimum wage, we should make sure we do not let this happen again, where we go for over a generation. And there's a really simple fix, which is you index the minimum wage, which many states increasingly do. So every year it's automatically raised. It doesn't require us to debate this ad nauseum, you know, over and over

again, and it just let it do its job. And so I think we have the tools. I think we have the evidence. I think it's a matter of having the political will. Aaron Dubay is Provost, Professor of Economics at the University of Massachusetts. Amherst, an author of The Wage Standard, What's Wrong in the Labor Market, and How to Fix It. Professor Dube, we really appreciate your time, and I'm in full support and full agreement, so thank you. Thanks for having me. Great to be here. As we end this episode, a quick check-in on my SpaceX prediction. Two weeks ago, before SpaceX went public, I predicted that the stock would,

rise at least 25% on the first day of trading. That it did. The stock hit $176 on day one, up almost 30%, and then continued to rise the following week, hitting a high of nearly $220 per share. So check. Part two of my prediction, however, was that over the next six months, the stock would get cut in half. Why? Because I believed and still believe that the valuation makes no sense. And, Also, because billions of dollars' worth of lockups would soon expire, thus allowing early investors to sell their shares, thus putting downward pressure on the stock. That hasn't happened yet.

However, we are starting to see warning signs. The stock has already fallen as much as 30% in just a few days. It also shed $400 billion in market cap in a single day, which was the second largest one-day wipeout in stock market history. and while it did recover some losses yesterday, it's still 22% off of its highs. Now, keep in mind, this is all happening before any of the lockups have even expired, which means that the stock has yet to go through the real test, which is when thousands of investors will choose whether to hold the stock at an unreasonable valuation

or sell it and then go buy themselves a house or a boat or perhaps even a plane. I know what my money's on. Having said that, there is one bright spot ahead for SpaceX, and that is when it will be officially included in the NASDAQ 100 index. That means that roughly $8 billion worth of SpaceX shares will be automatically purchased by passive investors, thus temporarily increasing demand, and that is set to happen in about two weeks.

So that's the good news for SpaceX. Aside from that, though, there's not much to be excited about here. SpaceX is about to undergo some of the greatest selling pressures in history. We've already seen how a simple bond offering was enough to make investors nervous. Now just imagine how nervous they will be when the insiders start to sell. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon. Isabella Kinsel, Kristen O'Donohue, and Mia Silverio, and our social producer is Jake McPherson.

Thank you for listening to Profi Markets from ProfiMedia. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.