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Space Exploration Technologies (NASDAQ: SPCX) entered the stock market with a bang. The Elon Musk-led space and artificial intelligence (AI) company made its debut earlier this year with the largest initial public offering (IPO) in history, and now sports a market cap of $2 trillion. That is the seventh-largest in the world.
Investors are bullish on SpaceX’s growth prospects in AI and space connectivity. What could a $2,000 investment in SpaceX be worth in 10 years’ time? When you look at the numbers, a lot is riding on future growth.
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Large AI and space investments
As Musk is wont to do, SpaceX is trying to tackle many growing industries at once. This includes AI through the xAI business (also owned by Musk) that was acquired before the IPO. SpaceX poured $16.5 billion into AI capital expenditures (capex) last quarter, more than its entire quarterly revenue. (Note that the company calls that segment Super Intelligence.) Management expects a roughly twofold increase in consolidated capex this quarter, resulting in up to $40 billion spent in a single three-month period.
SpaceX is making these large capital investments due to the apparently insatiable demand for data centers among AI companies. Revenue from SpaceX’s AI infrastructure division grew by more than 10x last quarter to $7 billion, with further aggressive growth expected this quarter.
It is also growing quickly in space-based connectivity with Starlink satellite internet. Connectivity revenue was $5.25 billion last quarter, up from $3.1 billion in the same quarter a year ago. As more Starlink satellites launch into orbit, Starlink revenue should continue to compound.
The bull case assumes aggressive growth
While the business is growing quickly, a SpaceX bull case requires very optimistic growth assumptions over the coming years. Musk believes the company’s annual recurring revenue (ARR) could reach $500 billion or more by the end of 2027, translating to $125 billion in Q4 2027 revenue.
In the third quarter, revenue was $14.6 billion across all of SpaceX. So getting to $125 billion from now would require close to 10x growth in revenue, which does not seem realistic. But, if SpaceX can become a winning neocloud provider of cloud services for AI, it could reach $1 trillion in revenue sometime in the next 10 years. That’s still a highly optimistic prediction, but more realistic than Musk’s claim.
