On Wednesday, shares of SpaceX experienced a significant decline, dropping by $10.06, or 8%, to $115.27 during early afternoon trading. This downturn occurred despite the company reporting robust revenue growth in its inaugural public quarterly earnings statement, raising concerns among investors regarding the firm’s increasing investments in artificial intelligence.
Investors expressed skepticism about whether SpaceX’s substantial financial commitments to AI would be adequate to support its lofty $1.5 trillion valuation. The earnings report released on Tuesday revealed that the company allocated $15.8 billion for AI-related capital expenditures in the second quarter, a figure that more than doubled its first-quarter spending.
David Trainer, CEO of New Constructs, an investment research firm, commented in an email to CBS News, “The entire market is starting to doubt that such extensive spending on AI will pay off for every company. Not all firms can emerge as winners, yet they are all investing as if they will.” This sentiment reflects a broader market anxiety about the sustainability of such investments.
While SpaceX’s quarterly performance was strong, investors remained concerned about the company’s ability to execute its ambitious plans, which include launching data centers into space. Jay Ritter, an IPO expert and professor at the University of Florida’s Warrington College of Business, noted in an email to CBS News, “Given Elon Musk’s history of making grand promises, investors are treating some of the more optimistic predictions with skepticism.”
In the second quarter, AI-related expenditures comprised 86% of SpaceX’s total capital expenditures, which amounted to $18.4 billion between April and June. Musk, during the earnings call, stated, “We believe we are scaling up our AI computing capacity faster than anyone else, and we are making significant advancements in our AI models, particularly with the recent launch of Grok 4.5.”
SpaceX reported second-quarter revenues of $7.8 billion, surpassing analysts’ expectations, and reduced its losses to $541 million, down from $1 billion the previous year. Ritter remarked, “The positive aspect is that revenue and earnings exceeded projections, and the company is hopeful about launching orbital data centers as soon as next year. However, the downside is that they are investing heavily in Earth-based data centers, which face considerable competition.”
The primary revenue driver for SpaceX remains its satellite division, which includes the Starlink service. Nonetheless, the AI sector holds promise for enhancing SpaceX’s valuation in the future, according to Nicolas Owens, an equity analyst at Morningstar. He mentioned in a Wednesday report that, despite the stock’s recent drop, Morningstar still considers SpaceX shares to be overvalued.
Further pressure on SpaceX’s stock could arise on Thursday when up to 911.5 million shares become available for trading due to the expiration of a lockup period, potentially flooding the market. Paul Karger, co-founder and managing partner at private investment firm TwinFocus, explained in an email, “While the lockup expiration doesn’t guarantee that all insiders or early investors will sell, it does increase the potential share supply in the market, which can create short-term downward pressure on the stock.”
Edited by Aimee Picchi
