SpaceX's AI spending unnerves Wall Street despite promises of quick payoff

Despite SpaceX's executives claiming that increased artificial intelligence (AI) spending will pay off within a year, Wall Street remained unconvinced following the company's first earnings report since its IPO in June. While revenue in Q2 surged 92% year-over-year, capital expenditures (capex) jumped sixfold to $18.4 billion, surpassing total sales for the period.

Over 80% of SpaceX's capex was allocated to AI, a sector where the company lags behind industry leaders like OpenAI, Anthropic, and Google. The capex figure exceeded analysts' average estimate of $13.22 billion.

Elon Musk, SpaceX's CEO, assured investors that the company would achieve $100 billion in annual recurring revenue (ARR) by the end of 2026, regardless of the current challenges. However, the stock plummeted by 7.5% in after-hours trading, erasing the gains made throughout the day and leaving the shares more than 20% below their initial value on June 12.

CFO Bret Johnsen attempted to explain the financial situation, stating that SpaceX is deploying capital efficiently and achieving a one-year payback on AI compute spending. Yet, investors remained skeptical, given SpaceX's heavy reliance on cloud service contracts and the looming legal battle regarding pollution controls at its Memphis data centers.

The AI business has been struggling, with SpaceXAI recording $2.56 billion in revenue and a $1.26 billion operating loss in Q2. Despite this, Johnsen highlighted that the new cloud agreements have led to "significant margin expansion." Nonetheless, SpaceX's AI venture is still bleeding cash, and the company faces significant challenges in aligning short-term revenue generation with long-term AI ambitions.