SpaceX’s $1.77 trillion IPO was, by any measure, historic. Whether it was justified is a different question.

Keith Snyder, a senior equity analyst at the Center for Financial Research and Analysis (CFRA), says he can only match SpaceX’s current $2 trillion market cap by factoring in “almost comical growth for AI”—and still falling short. His estimate: xAI accounts for 71% of SpaceX’s valuation. “I hope most investors did not give that number weight,” he said of the S-1’s AI projections.

To be sure, one part of SpaceX’s rocket and satellite business is profitable and dominant—Starlink counts millions of paying subscribers globally. And bulls argue that xAI is early-stage; Grok’s integration into X gives it a distribution edge; and enterprise adoption curves for AI products can inflect sharply. SpaceX did not respond to Fortune’s request for comment.

The S-1 gave investors something to dream on: SpaceX claimed 93% of its total addressable market would be “in AI”—a figure roughly equivalent to U.S. annual GDP, or $26.5 trillion. “This is an Elon Musk company, so Elon Musk numbers are wildly optimistic,” Snyder told Fortune. “And so the TAM number that they came out with, I have absolutely no idea how they arrived at [that].”

To Snyder’s point, SpaceX explicitly argued in its S-1 filing with the Securities and Exchange Commission: “We believe we have identified the largest TAM in human history.” The company estimated $28.5 trillion in quantifiable TAM, of which $26.5 trillion was allocated for AI, “across $2.4 trillion in AI infrastructure, $760 billion in consumer subscriptions, $600 billion in digital advertising, and $22.7 trillion in enterprise applications.”

The current data offers little comfort for that optimism. Of the 117 million people who currently interact with Grok via its freemium model, just 1.6% pay for the premium tier (1.9 million SuperGrok, SuperGrok Heavy, and SuperGrok Lite paid subscribers). That’s compared to roughly 5% who paid for ChatGPT in 2025. New data from fintech Ramp’s AI adoption tracker shows xAI at just 3% business adoption, against Anthropic and OpenAI—both at 40%.

“The issue is if those users are not adopting Grok on a weekly basis, or ideally a daily basis, and for sticky high-value use cases, they’re probably never going to pay for Grok,” Kyle Poyar, a former operating partner at venture capital firm OpenView, told Fortune. Poyar, who has expertise in AI monetization and product-led growth, mentioned Anthropic as an example of an AI company making itself indispensable by “going into much deeper, stickier use cases” and using their free offering as an “effective on-ramp.”

Poyar explained that AI companies are increasingly framing covering the costs of tokens for users as a marketing expense to draw in more profitable customers. Instead of spending money on ads, Anthropic and OpenAI spend money on compute for users, and “it’s going to accomplish the same thing” in acquiring paid customers and ideally enterprise ones, according to Poyar.

“I do think that strategy is working for Anthropic,” Poyar said. “It’s not clear to me that that’s working as well for xAI.”

Snyder said that while Grok is still in its early stages compared with other AI models, its status as a “glorified Amazon Web Services” that rents out excess computing power to Google and Anthropic is a concern if it can’t evolve its own model to compete.

“They’re behind Open AI and Anthropic, in my opinion, in terms of the complexity and the sophistication of the model itself, and so I think that is also reflected in that 1.6% number,” Snyder said. “It’s that other people can do everything better right now, and so there aren’t a lot of incentives to sign just with Grok when you know the other companies have better stuff available and out in the market.”

There’s also a limit to how long companies can cover token costs before losing out on converting customers, according to Vineet Kumar, a professor at Purdue University’s Mitch Daniels School of Business known for his freemium model research.

“If a firm is more generous with their free offering, more users would sign up to use the service in the first place,” Kumar said. “But if it is too generous, then users have less reason to upgrade to the premium plan.”

Evan Bailyn, whose company First Page Sage tracks and publishes B2B conversion rates across industries, said that unlike Spotify—which enjoys high conversion rates because it is “integral to the way people exercise and socialize and relax”—Grok is more of a “nice to have” to add onto X with no real “incentive to be premium.”

As a result, Bailyn doesn’t expect Grok to become a “front-runner” in the enterprise AI race.

“OpenAI, Google Gemini, and Anthropic just have pretty much all the enterprise market share, so they have to really, really climb there,” Bailyn said.