Alphabet (GOOG, GOOGL) shares made headlines recently after the company’s AI division saw a series of high-profile departures.
Gene Munster, managing partner at Deepwater Asset Management, recently said on CNBC that the brain drain at Google should not be ignored, arguing that the departures of key AI researchers could have implications beyond the headlines. Munster said Google has seen about six major departures over the past three months and that the loss of talent could affect the company’s culture of innovation and its ability to develop future AI models. He also pointed to signs that Gemini has started to slip in AI model rankings relative to competitors. He thinks these developments are not a positive trend.
At the same time, Munster highlighted significant improvements from Grok, saying he expects the AI model to potentially break into the top three models as new versions are released. Grok was developed by xAI and is integrated into X, while xAI is now part of SpaceX following SpaceX’s acquisition of the AI company.
SpaceX: An Attractive AI Bet?
The market is figuring out SpaceX isn’t just a space company. The Space business contributed just 12% of Q2 revenue and analysts think the contribution of space may keep shrinking as other streams kick in. Connectivity (Starlink) brought in $4.29 billion, up 66% year over year, with 12 million subscribers, double last year’s count. AI brought in $2.56 billion, up 247% year over year, boosted by a big Anthropic deal.
The Bull Case Rests On $100 Billion ARR
Musk guided to a $100 billion annualized revenue run rate by December, up from a Q2 run rate near $31 billion. If SpaceX hits it, the stock trades at 14x that figure and looks reasonable. Bulls also point to Musk’s math on AI: if SpaceX can push AI compute capacity from 1.4 GW today to 15 GW by end of 2027 at $50 million per megawatt, that’s $750 billion in annual AI revenue potential.
The Bear Case Is About Cash
The bear case is simpler. SpaceX spent $15.8 billion on AI capex in one quarter for just 0.4 GW of new capacity. That’s roughly $40 billion per gigawatt. Scaling to Musk’s 15 GW target implies capex that dwarfs the $100 billion cash balance. JPMorgan estimates $200 billion in capex for each of 2027 and 2028. SpaceX generated negative $25 billion in free cash flow in the first half of 2026.
Customer concentration is a risk. Two customers made up 38% of quarterly revenue, and cloud contracts can be canceled with 90 days’ notice. Anthropic’s own compute pipeline shows deals with Amazon, Google, Microsoft, and Nvidia that give it plenty of alternatives to SpaceX.
While we acknowledge the risk and potential of SPCX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SPCX and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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