Experts Elon Musk and SpaceX mark a game-changer for share investing

The float of Elon Musk’s SpaceX has changed Australian share investing forever.

In its first few days trading on Wall Street, the stock is up about 40 per cent.

It’s an overpriced speculative play linked to the whims of a single entrepreneur. On that basis alone, it’s an imperfect prototype for a new era of Australian access to Wall Street.

But that’s not the point.

What matters is that an estimated 40,000 Australian investors were offered a first-time ticket to a landmark Wall Street float, and it paid off in wads.

It will take a lot of selling to drive this $US2.4 trillion ($3.4 trillion) stock back to a point where those profits are lost.

At a stroke, the creation by CommSec, Sharesies and Macquarie of a new doorway to Wall Street through releasing pre-IPO SpaceX stock is a game-changer.

Everyday investors can now invest in floats once reserved only for the very rich.

And the very rich have joined this expedition. The nation’s wealthiest person, Gina Rinehart, took a $US1bn slice of SpaceX.

Of course, IPOs don’t always pay off. In fact, many lose money, but then again the SpaceX story is nothing if not unique.

We already know that Wall Street returns have beaten the ASX out of the door for decades and, while our dividend yields may be better, they are slim compensation for most investors.

Morgan Stanley, the wealth advice group that dominates the upper reaches of the Barron’s Top 150 Adviser list, has spelt it out clearly to investors in a recent note.

After warning of a slowdown ahead for Australia, it suggests: “A robust earning outlook favours developed market equities, with a preference for the US.”

The shift away from the ASX has been incremental, but now it may be about to enter overdrive.

Or as Billy Leung, investment strategist at ETF provider Global X puts it, local investors with a strong home bias are missing out on “one of the most powerful wealth creation cycles of our time”.

SpaceX is just the first of several mega IPOs coming down the line in the months ahead, including OpenAI and Anthropic. In the absence of a sharemarket crash between now and then, the next US float aimed at the mass market in Australia will result in even more investors queuing for stock.

Jacqui Neumann, head of capital markets at trans-Tasman stockbroker Sharesies, says the SpaceX deal is a line in the sand.

“Australia has become a really important capital pool in global markets,” Neumann says. “We are one of the deepest ­retail markets in the world, and it will continue to attract deals of this scale.”

The flip side of this is the weakness of the ASX. Put simply, it is just not a good enough market in which to hold most of your sharemarket investments.

For all intents and purposes, there is no tech sector and certainly no AI sector to speak of.

The local market’s flagship AI stock is NextDC, which is up a grand total of 9 per cent over the past year. In the US, the proxy for average performance of all AI stocks, the Philadelphia Semiconductor Index, is up 150 per cent over the same period.

To top it off, changes announced last month in the budget rewards incumbent dividend payers and penalises growth stocks. You can see why money once bound for the ASX is moving offshore. Keep in mind the CGT backflip this week does not change the outlook for share investors in any way – your growth shares will be taxed more sharply than your dividend shares under the new CGT arrangements.

We also know from the limited public data on this trend that when Australians do move their money into offshore sharemarkets, they are hunting for tech and AI opportunities.

Top US stocks traded by CommSec clients in May

1. Nvidia
2. Micron Technology
3. Tesla
4. Taiwan Semiconductor Manufacturing Company
5. Sandisk Corp
6. Intel Corp
7. Direxion Daily MU Bull 2XShares (ETF)
8. Microsoft Corp
9. AMSL Holding
10. Alphabet

Source: CommSec

Just take a look at the list of CommSec’s top-traded international stocks list for May. It is almost completely US-listed tech and AI stocks, with Nvidia, Micron topping the list, while Elon Musk is already there with Tesla in fourth place.

Inside the wealth management business, leading advisers have been steadily telling investors to get their offshore stock allocations higher for years.

Centaur Financial Services adviser Hugh Robertson tells The Australian’s The Money Puzzle podcast that his firm allocates about 40 per cent to global equities and 20 per cent to Australian stocks.

“We just can’t see where the growth is going to come from [on the ASX],” Robertson says.

“You have that market capitalisation risk where the big banks and the resource companies dominate. Perhaps in the years gone by, you were better diversified across more sectors in the ASX. Now you’re not really getting that.”