Trader Says ‘The Stock Market Is Drunk On A Narrative’

McDonald said that SpaceX’s IPO is arriving at a time when investors have become increasingly captivated by AI: “The stock market is drunk on a narrative,” he said. “Artificial intelligence is the new everything.” He warned that investors are pricing in future earnings years in advance, while paying too little attention to competition, delays and execution risks.

According to McDonald, SpaceX, OpenAI and Anthropic could become the defining deals of the current AI-driven market cycle. “I fear there’s a good chance the market gets overwhelmed,” he said. “Every cycle features a marquee deal or IPO that defines its peak.”

He pointed to previous market milestones, including the AOL-Time Warner merger during the dot-com era and major deals that preceded earlier downturns, arguing that today’s AI IPO boom could serve a similar role.

McDonald called the IPO wave as “the coup of the century,” noting that the combined valuation of SpaceX, OpenAI and Anthropic has surged from about $760 billion a year ago to $3.5 trillion today. “Basically, they tripled in a year, which is pure madness,” he said.

He also warned that adding another group of AI giants to major stock indexes could leave retirement savers even more exposed to a sector that already dominates market benchmarks. “If these new heavyweights are added, everyone’s 401(k) is almost certain to face a deathly overdose,” he said.

Why McDonald Thinks Passive Investors Are At Risk

McDonald’s biggest concern is about passive investing and retirement accounts. He said that accelerated inclusion into benchmarks such as the S&P 500 and Nasdaq-100 could force index funds to buy billions of dollars worth of SpaceX shares regardless of valuation. McDonald called this “the dark side of passive investing” and warned that passive investment strategies have become so large that markets can be distorted when giant companies enter major indexes.

Based on his estimates, SpaceX could debut as one of the largest companies in the S&P 500, with passive investors eventually holding nearly half of its publicly traded shares: “With accelerated index inclusion, the retirement savings of broad swaths of the population are effectively being hijacked,” McDonald said.

He noted that AI tech companies already account for nearly half of the S&P 500’s market value. “If these new heavyweights are added, everyone’s 401(k) is almost certain to face a deathly overdose,” McDonald said.

In a separate post on X, McDonald made a direct appeal to investors: “This is the moment. As a former Lehman trader I feel it’s the time to speak up. We must STOP this. Your 401k is on the line.”

Recently, Nasdaq and FTSE Russell changed rules to allow faster inclusion of mega-cap IPOs into key indexes, while S&P Dow Jones Indices is considering similar changes. Bloomberg estimates that passive funds could be forced to absorb nearly $20 billion of SpaceX stock if the S&P adopts a comparable fast-track approach.

Tesla, SpaceX And xAI

The debate comes as Musk continues to fuel speculation about deeper ties between Tesla, SpaceX and xAI. During a recent Forbes interview, Musk was asked whether he could eventually see Tesla and SpaceX operating under one company. He responded cautiously, noting that some of his businesses are publicly traded while others are moving in that direction.

The comments followed SpaceX’s acquisition of xAI earlier this year in an all-stock transaction valued at $1.25 trillion. Tesla has also received approval to convert its previous $2 billion xAI investment into a stake in SpaceX, further tightening links across Musk’s businesses. SpaceX is expected to begin its IPO roadshow in a few days.

How Do Retail Traders Feel About TSLA And SpaceX?

On Stocktwits, Tesla sentiment was ‘bearish’ with ‘normal’ message volume, while SpaceX sentiment was ‘bullish’ amid ‘extremely high’ chatter levels.

One user said, “The merger will drop this price to single digits. Get your short positions loaded.”

Another user questioned, “Is Elon teasing the Tesla/Space X merger thing just so people don’t mass exit Tesla shares”

So far this year, TSLA stock has lagged its “Magnificent Seven” peers, making it the group’s third-worst performer, with a 3% decline.

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Deepti Sri has no position in any of the stocks mentioned in this article. StockTwits’ news team content is for informational purposes only and is not intended as investment advice. For more, see our editorial policy. This article was originally published on StockTwits.

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