SpaceX slides as AI spending worries overshadow early returns

On August 5, SpaceX presented its first earnings call as a public company, boasting faster-than-anticipated returns from its AI investments. However, investors remain wary about the company's ability to sustain profits from its Starlink business, which funds expensive data centers and Nvidia chips. Shares dropped 12% on Wednesday, significantly below the $135 IPO price. Analyst Carolane de Palmas at ActivTrades predicts the stock may remain under pressure as lock-up periods expire.

The company's AI revenue more than tripled from the previous year, and SpaceX signed $6.7 billion in cloud contracts since the second quarter. CFO Bret Johnsen claims AI spending is becoming more efficient, with a payback period of less than a year. However, AI spending will continue to be high, as SpaceX remains on track for a $100 billion annualized revenue run rate by year-end.

This shift in the investment narrative contrasts with the traditional data center investments that typically take years to recover their costs. Elon Musk's optimistic predictions for his Tesla venture have often fallen short, leading to skepticism about SpaceX's ability to deliver on its promises. With $18.4 billion in capital expenditures during the quarter, SpaceX remains deeply cash flow negative while investing heavily in AI infrastructure.