Space Exploration Technologies Corp. (NASDAQ:SPCX) is expanding beyond rockets and satellite connectivity, with its terrestrial artificial intelligence compute business emerging as a potentially significant growth engine. The company has been rapidly building AI data center capacity on Earth and is increasingly monetizing that infrastructure through agreements with major technology companies.
However, SpaceX’s ambitious expansion requires significant capital, raising questions about sustainable cash generation. Our Insider Monkey article on SpaceX’s $100 Billion Within Reach, but Its Cash Flow Tells Another Story, reveals how cash flow remains an important consideration alongside its projected revenue growth.
In July, Reuters reported that SpaceX’s Colossus compute facilities could generate more than $28 billion in annual revenue, highlighting the enormous commercial opportunity associated with the company’s AI infrastructure buildout.
That opportunity has gained further attention from Wall Street. On September 28, TD Cowen highlighted SpaceX’s terrestrial AI compute leasing business as one of its fastest-growing revenue streams.
TD Cowen expects compute-related sales to account for approximately 35% of SpaceX’s revenue in 2026. By 2028, the research firm expects that figure to rise to 65%, potentially making AI compute a larger contributor to revenue than Starlink.
The research firm initiated coverage of SpaceX with a Buy rating and a $200 price target, citing the potential for rapid growth in terrestrial AI infrastructure. Analyst John Blackledge expects SpaceX’s terrestrial gigawatt capacity to increase to 6 gigawatts by the end of next year, up from approximately 2.1 gigawatts in 2026.
Strong Financial Performance Supports a Premium Valuation
Trading at about $167 per share and a market capitalization of $2.27 trillion, the stock trades at a substantial premium compared to conventional aerospace companies. Impressive financial results support the growth case behind the premium valuation as revenue jumped 92% in the second quarter to $7.8 billion, with adjusted EBITDA nearly tripling to $3.5 billion.
Wall Street expects full-year revenue of $44 billion and EBITDA of about $21 billion. At a current valuation of approximately $2.27 trillion, SPCX trades at a price-to-sales multiple of about 51.6x based on $44 billion in expected revenue. This means investors are paying $51.60 for every $1 of expected sales. Based on an enterprise value of roughly $2.19 trillion, SPCX trades at approximately 49.8x forward EV/revenue and 104.3x forward EV/EBITDA.
The premium valuation is not being justified by historical revenue. Instead, it’s justified by the expectation that revenues will explode over the next few years, driven by strong execution from Starlink and the emerging AI-compute business.
TD Cowen also expects SpaceX to generate $8.1 billion in AI compute leasing revenue in the fourth quarter and exit the year with approximately $41 billion in annual recurring revenue. These projections underscore how quickly the AI infrastructure business could scale if SpaceX continues to secure large customers and expand capacity. SPCX ranked in our list of 10 Stocks That Will Go to the Moon According to Reddit. See which four stocks ranked ahead of it.
AI Compute Risks
Despite the growth opportunity, Space Exploration Technologies Corp.’s AI compute business faces several significant risks. One of the biggest concerns is the enormous amount of capital required to build and maintain AI infrastructure. SpaceX will need to continue spending billions of dollars on GPUs, data centers, networking equipment and power infrastructure to keep pace with rapidly increasing AI workloads.
As a result, strong revenue growth may not necessarily translate into comparable free cash flow growth. Heavy capital expenditures could weigh on cash generation, particularly during periods when SpaceX is aggressively expanding capacity.
Competition is another important risk. SpaceX is entering a market that includes some of the world’s largest technology companies and cloud providers, many of which have substantial financial resources and established AI infrastructure businesses. As competitors add capacity, SpaceX’s current advantage could narrow.
There is also a risk that AI compute becomes increasingly commoditized. If computing capacity becomes more abundant, customers could gain greater negotiating power, putting pressure on pricing and margins. That could make it more difficult for SpaceX to generate attractive returns on the billions of dollars being invested in AI infrastructure.
Hedge Fund Positioning
Institutional interest in Space Exploration Technologies Corp. remains significant. As of the end of the second quarter, 119 hedge funds held SpaceX stock, according to the Insider Monkey database. VY Capital was among the largest investors, with a stake valued at approximately $46.44 billion, followed by BAMCO Inc. with $24.9 billion and D1 Capital Partners with $21.54 billion.
Meanwhile, bearish positioning has declined. Short interest fell from approximately 184.39 million shares as of August 14 to 162.25 million shares as of September 15, bringing short interest to about 1.23%.
The Bottom Line
Space Exploration Technologies Corp. is increasingly positioning its AI compute business as a major growth driver alongside Starlink and its core space operations. Rapidly expanding data center capacity could provide the company with a substantial new source of recurring revenue.
However, the opportunity comes with significant capital requirements and intensifying competition. SpaceX will need to balance its aggressive infrastructure expansion with the need to generate attractive returns on that investment. For investors, the trajectory of AI compute demand, utilization rates, pricing, and capital spending will be key factors in determining how much the new business ultimately contributes to SpaceX’s long-term financial performance. Given the valuation and capital intensity, SPCX looks more attractive for investors willing to accept substantial execution risk than for those seeking a clear margin of safety today.
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 this cheapest AI stock.
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