SpaceX dives 10% after AI spending surge rattles investors

SpaceX's stock took a significant hit on Wednesday, falling over 10% in premarket trading, following a surge in AI spending that caused investor concerns. Despite beating expectations in its first earnings report as a public company, the company's capital expenditures jumped sixfold to $18.4 billion in the second quarter, a figure that exceeded analysts' predictions.

This increased spending was primarily directed towards AI development. The company's stock traded at just above $125 on Tuesday, falling short of its $135 IPO price and considerably below its all-time high of over $200 following its listing. This decline reflects investor apprehension over whether large tech companies can demonstrate a return on their billions in investments.

While SpaceX's AI models are considered behind those of OpenAI and Anthropic, the company aims to establish itself as an alternative cloud provider by renting out the computing power it's building using Nvidia chips. CFO Bret Johnsen sought to ease investor worries about capex spending, stating that the company is "efficient" with its spending, achieving a payback period of less than a year on AI compute capital deployment.

Despite narrowing losses and optimistic future revenue projections, the share price dropped as investors remained skeptical about SpaceX's ability to grow rapidly and manage escalating costs before achieving profitability. Additionally, the company faces another market-moving event on Thursday — the expiration of insider lock-ups, allowing insiders to sell portions of their shares.