Key Points

SpaceX claims a $28.5 trillion total addressable market.
A single project could make or break that growth potential.
These 10 stocks could mint the next wave of millionaires

SpaceX is preparing to go public. With a targeted valuation of $1.77 trillion, SpaceX would instantly become one of the biggest IPO stocks in history.

Every investor should be asking themselves one question: Where exactly is this valuation coming from? Digging into the company's IPO prospectus is the best way to find out. Buried in this 370-page document is a surprising phrase: The company claims that long-term growth will be "highly dependent on the successful development and scaling" of a single project.

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This one project could make or break the SpaceX IPO

SpaceX claims a total addressable market of $28.5 trillion, which the company claims to be the largest total addressable market of any business in history. Breaking down that total opportunity set, however, reveals several critical details.

A whopping $26.5 trillion in value is associated with one opportunity alone: artificial intelligence (AI). Just $1.6 trillion in value is related to the company's Starlink internet service, currently SpaceX's sole profitable division. Meanwhile, a paltry $370 billion is tied up in what SpaceX calls "space-enabled solutions." This segment includes rocket launches, the service SpaceX is arguably best known for.

From this information, you may think rocket launches will not be an important part of the SpaceX story long-term. But that would be missing the forest for the trees. Many of SpaceX's most valuable growth opportunities, everything from launching a stand-alone Starlink Mobile service to establishing orbital data centers, rely heavily on the company's launch capabilities. Most critical is the successful commercialization of its Starship megarocket, which would dramatically lower the costs associated with getting the aforementioned growth opportunities off the ground.

"In particular, our ability to execute our growth strategy is highly dependent on the successful development and scaling of Starship and the ability to increase our launch cadence, both of which are subject to challenges and uncertainties inherent in the development and deployment of new and complex technologies," SpaceX's IPO prospectus warns.

SpaceX CEO Elon Musk has a track record of hinging a company's entire growth runway on a single product launch. Musk claims that Tesla was only a month away from bankruptcy while attempting to scale the company's first affordable vehicle, the Model 3. Scaling its next affordable model, the Model Y, experienced similar challenges. Today, however, those two models account for well over 90% of Tesla's auto sales. The bet, obviously, paid off big.

The Starship megarocket has the same potential for SpaceX. If successful, SpaceX will far and away be the leader in getting huge payloads to space safely and affordably. While previous rocket launches cost $100 million or more, Starship launches are expected to scale down to just $10 million per launch despite its much larger size and weight.

"Any failure or delay in the development of Starship at scale or in achieving the required launch cadence, reusability and capabilities thereafter would delay or limit our ability to execute our growth strategy, including the deployment of next-generation satellites, global satellite-to-mobile connectivity, and orbital AI compute, which could materially adversely affect our business, financial condition, results of operations, and future prospects," SpaceX warns in its prospectus.

In short, investing in the SpaceX IPO requires confidence in the successful commercialization of its Starship rocket, even if AI and Starlink initiatives ultimately result in more revenue and profit long-term. In this regard, I am rather bullish. There are always setbacks when it comes to rocket development and commercialization. Put simply, it is a tough business with frequent catastrophic failures.

But SpaceX has an enviable lead. As The Wall Street Journal concluded earlier this year: "No question, SpaceX is far ahead of Blue Origin in building and launching rockets. Leaning on its workhorse Falcon 9 rockets, SpaceX launches more often than its competitors in the U.S. and elsewhere, giving it a dominant position in launch services that no rival has matched."

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.