During the October 2 episode of Mad Money, Jim Cramer connected Delta Air Lines, Inc. (NYSE:DAL) with Space Exploration Technologies Corp. (NASDAQ:SPCX) while discussing Delta’s choice of satellite internet provider. He said:
Friday, we get numbers from one of the best-run airlines, Delta. The CEO Ed Bastian’s been in the news because he chose Amazon’s in-flight Wi-Fi over Starlink. Elon Musk, who runs Starlink through SpaceX, has said that Bastian could end up losing his job for picking Amazon over Starlink. I wouldn’t go that far, but I do know that Cramer fave SpaceX has broken out to the upside.
You can check out more on what Wall Street thinks about SpaceX’s AI investment.
Delta’s Wi-Fi Decision Is a Longer-Term Investment
Delta Air Lines, Inc.’s agreement with Amazon calls for an initial installation of Amazon Leo connectivity on 500 aircraft beginning in 2028. The partnership also expands their existing technology relationship. That timetable makes the decision a longer-term service investment, rather than a change already reflected across Delta’s fleet.
The airline’s current earnings depend much more directly on passenger demand and operating costs. Second-quarter adjusted revenue increased 14% to $17.7 billion, with premium revenue rising 17% and loyalty-related revenue growing 19%. Delta reaffirmed full-year adjusted earnings guidance of $6.50 to $7.50 per share and free cash flow of $3 billion to $4 billion. We also recently drew a comparison between Delta and another airline to see which stock looks more attractive.
SpaceX’s Compute Business Broadens the Story
Cramer’s interest in Space Exploration Technologies Corp. extended beyond Starlink, as he said:
CNBC Investing Club members know that I really like SpaceX, even if I think it’s maybe too speculative for the Trust. It does have a huge amount of compute through its agglomeration of NVIDIA chips. And by the way, it hit its all-time high, but then it came back… But anyway, NVIDIA could bring in lots of profits given that there’s a real shortage of computing power. So, if you bought their chips like Musk did, he’s making a ton of money with SpaceX by leasing them out, by basically selling the compute power.
SpaceX reported second-quarter revenue of $7.8 billion, up 92%. AI segment revenue reached approximately $2.56 billion, with new cloud-service agreements contributing $1.6 billion in incremental AI infrastructure revenue. Those agreements represented $14.1 billion in contracted sales. Cramer is keeping a close eye on SpaceX and weighed in on Starlink and AI opportunities.
Fuel Costs and AI Spending Create Different Risks
Delta Air Lines, Inc.’s adjusted fuel expense increased 77% to $4.4 billion in the second quarter. Strong demand helped absorb that increase, but another rise in fuel prices would make the company’s earnings targets harder to achieve. Space Exploration Technologies Corp.’s rapid growth has not yet produced consistent companywide profitability. It reported a $541 million quarterly net loss, while its AI segment recorded a $1.26 billion operating loss and approximately $15.83 billion in capital expenditures. Compute revenue is growing quickly, but the spending required to develop that business remains substantial.
The stocks also require different valuation benchmarks. Delta trades at approximately 11.9x forward earnings, versus 10.4x for United Airlines. SpaceX traded at approximately 98.2x enterprise value to trailing revenue, compared with 54x for Rocket Lab. Rocket Lab offers only a partial comparison because SpaceX also includes connectivity and AI operations. Nevertheless, the multiple shows how much future expansion is already reflected in SpaceX’s valuation. You can find out more about which airline Redburn prefers.
Hedge Funds Hold Both Despite Different Risk Profiles
According to Insider Monkey, 75 hedge funds owned Delta Air Lines, Inc. shares in Q2, up from 68 in the prior quarter. Space Exploration Technologies Corp. had 119 holders, with no comparable Q1 figure because it had not yet completed its IPO. Short interest stood at 4.01% for Delta and 2.43% for SpaceX. The ownership counts cannot establish a comparable quarterly trend for the newly listed company.
The Wi-Fi dispute connects these businesses, but it does little to settle their investment cases. Delta must protect profits from fuel inflation. SpaceX needs to turn fast-growing demand into returns on enormous infrastructure spending. While Cramer likes both companies, he explicitly acknowledged the speculative element in SpaceX.
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