Behind SpaceX’s 14% Single-Day Share Price Plunge: Institutional Sell-Off and Retail Investors Taking Over

SpaceX's first financial report after going public triggered intense market turmoil, with the company's stock plummeting over 13% in a single day on Wednesday. Institutional investors were the first to flee, while retail investors bucked the trend and bought aggressively, leading to completely opposite conclusions about the same earnings report.

The core factor behind this sell-off was the much higher-than-expected capital expenditure on AI. According to the Q2 financial report released by SpaceX after Tuesday’s trading, capital expenditures exceeded $18 billion, nearly 40% above analyst expectations, with most funds allocated to data center construction and other artificial intelligence-related projects. Institutional investors reacted negatively and promptly reduced their holdings, causing the stock price to tumble.

While institutions were selling, retail investors took the opposite side and bought in record amounts during the first hour of Wednesday’s session. This divergence between institutional and retail behavior reflects differing frameworks for interpreting the high investment business model in AI. Institutional investors are more focused on short-term financial metrics—the explosive increase in capital expenditure means free cash flow is under pressure and near-term profitability is uncertain; meanwhile, retail investors tend to view large-scale AI investments as the construction of long-term competitive barriers, betting that SpaceX will replicate the “heavy investment, later returns” growth trajectory seen in earlier tech giants.

Meanwhile, the market faces another significant pressure: as many as 911.5 million SpaceX shares will become tradable for the first time on Thursday, involving a market value over $100 billion and more than doubling the current publicly traded share count. This is one of the largest post-IPO lock-up expirations in US history, with further unlocks continuing through December.

Earnings Overspending Triggers Institutional Exodus

SpaceX closed Wednesday at $108.27, down 13.6% from the previous day, making it the main drag on the Nasdaq Composite Index’s 0.83% decline and the only negative contributor among the three major US stock indices. In comparison, SpaceX’s IPO issue price on June 12 was $135, meaning it has now fallen about 20% from its IPO price.

The financial report showed that SpaceX’s Q2 capital expenditures exceeded $18 billion, far surpassing Wall Street’s expectations with an increase of nearly 40%. This figure raised concerns among institutional investors about the company's near-term profitability, prompting them to cut positions immediately after the results were announced. Notably, before the report, SpaceX's stock had risen during Tuesday's session, and some analysts noticed unusually strong buying power in call options, indicating the market had high hopes for the earnings, ultimately resulting in a “buy the rumor, sell the news” price movement.

Retail Investors Buck the Trend, Record Net Buying

While institutions were selling, retail investors exhibited a starkly different market judgment. According to Vanda Research, retail investors posted a net buy of $22 million worth of SpaceX stock during the first hour of trading on Wednesday, ranking third among the 37 opening sessions since listing and more than triple the average first-hour net inflow.

The Vanda Research team wrote in comments to MarketWatch: “Institutional investors initially focused on the sharp rise in AI capital expenditures and near-term profit pressure, while retail investors seem to have drawn the opposite conclusion. Today’s buying demonstrates that investors continue to view aggressive AI investment as a signal that the probability of SpaceX becoming the next long-term winner is rising, not as a reason to sell.”

Unlock Flood Approaching, Historical Data as Reference

The greater test may come from the supply side. As many as 911.5 million restricted shares held by early investors and insiders will begin to unlock from Thursday, more than doubling SpaceX’s freely tradable share count. Subsequently, more shares will unlock in August and September and continue through December, comprising one of the largest post-IPO unlocking events in US market history.

Spectra Markets founder Brent Donnelly cited three widely-tracked stock unlocking cases from recent years for comparative analysis. Although the sample size is small and previous unlock events were far smaller than SpaceX’s, the data show that in these three cases, the first unlocking day typically formed a buyable, temporary bottom—though the subsequent rebound was not always V-shaped.

Donnelly said: “My baseline is that this information should be fully priced in by the market at this stage, and the upcoming supply shock is more likely to be a misleading bearish signal rather than a truly effective negative factor.”