Shares of Elon Musk’s space empire, Space Exploration Technologies (NASDAQ:SPCX | SPCX Price Prediction), have been in free fall in recent weeks, recently falling to $115 and change, close to $20 off the IPO price. Of course, most new investors who couldn’t participate in the IPO had to pay closer to $160 per share on the first day of public trade. Either way, it didn’t take long for investors to grow fearful shortly after the euphoric initial rise that helped Elon Musk temporarily become the world’s first trillionaire.
The hype has died down; the shorts have arrived, the float is rising, and there’s growing concern about the firm’s unprofitability. As I noted in prior pieces, AI-related CapEx, which has been worrisome for hyperscalers, would soon rattle SpaceX shareholders. Of course, advancing the Starship program doesn’t come cheap, either.
Heavy spend is never fun, but it’s very much necessary
While it seems like an uneasy time to be in SpaceX amid heavy spending as it builds data centers on Earth and in orbit, I do think that the pieces will gradually fall into place.
Like it or not, SpaceX is moving at a ridiculous pace, and investors might not yet be prepared for the rise in spend that accompanies it. And while it’s necessary to get that chokehold on cloud infrastructure beyond the clouds, it takes mouth-watering sums of investment to build the rails that take us to new frontiers.
The big question is whether the big payoff is shortly after the final track is nailed down or if it’ll flow in steadily over a more extended period of time. That’s the main question mark that makes it so hard to value SpaceX. It did take quite a while for sell-side analysts to do their homework and come up with a recommendation and price target.
With SpaceX reportedly in talks with the Pentagon to supply data center capacity (on the ground), it certainly feels like SpaceX has a huge advantage when it comes to terrestrial compute and a big, satisfied customer in place once orbital compute eventually comes online.
Once Starship gets going, the sky is the limit
In my view, SpaceX is locking in that chokehold on extraterrestrial compute. It has the transport monopoly in Starship to get assets out there (it’s like the railway to space, so to speak). And while the latest launch delay is a red flag for some, I viewed it as nothing more than a shakeout of some of the stock’s more weak-handed holders.
Starship needs to do that heavy lifting, and there’s not much room for failure. If the reusable rocket doesn’t go well, so much for the ambitious space endeavors. With such a valuable payload (GPUs, solar panels, and all the sort), any slight fumble could have disastrous consequences for the stock, which still looks expensive despite shedding nearly half of its value from the peak hit in June.
As Starship starts hauling, the real chokehold, I think, lies in the design of SpaceX’s orbital data center. If it stays cool and powered, the proof of concept will be in the books, and SpaceX will be ready to scale, likely faster than hyperscalers, including those with space ambitions, know how to react.
Indeed, SpaceX has moved at light speed with terrestrial data centers (think Colossus). And there’s no reason to think the firm can’t do the same with orbital data centers once it shows off a concept that actually works. If all goes according to plan, perhaps SpaceX will have monetized Starmind before its rivals get anything off the ground without its help.
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