Space Exploration Technologies’ (NASDAQ:SPCX) volatile year continues. The company’s shares took a tumble after the recent midterm elections in the U.S., as the results raised concerns about increased regulatory scrutiny on various corporations, including Elon Musk’s businesses. As of writing, SpaceX’s shares are trading at about $125, roughly 7% below its IPO price. Is now a good time to buy the stock?
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SpaceX is targeting a potentially huge AI market
Don’t let its name fool you: SpaceX’s largest opportunity lies in the artificial intelligence (AI) market. The company itself said as much when it identified a $26.5 trillion opportunity in AI, accounting for almost 93% of its total addressable market of $28.5 trillion.
SpaceX wants to bring 10 gigawatts of compute online in 2027 to tap into this opportunity. For context, what SpaceX wants to build in one year is on par with the individual worldwide capacity currently at the disposal of major hyperscalers like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN).
That won’t be a cheap undertaking for SpaceX, but the company is seeing such massive demand for compute capacity that it thinks it’s worth it. During the company’s third-quarter earnings call, management pointed out that SpaceX could rent out compute several times over its capacity if it said yes to every request. So, higher capacity, combined with increased AI spending, could supercharge SpaceX’s revenue growth, particularly within its AI segment, dubbed Super Intelligence (SI).
In the third quarter, SpaceX’s total revenue increased by 161% year over year to $14.6 billion. SI revenue came in at $7.6 billion, up 830% compared to the year-ago period. SpaceX reported a net income of $4.4 billion, significantly better than the $1.1 billion net loss recorded in the prior-year quarter.
SpaceX achieved outstanding results, largely thanks to its SI business, despite significant capex within this unit. That’s a great sign. Analysts expect SpaceX’s earnings per share to be positive next year, on average, even as it continues to spend massive amounts to increase compute capacity. If the AI market opportunity is even close to what SpaceX expects, the company could position itself as one of the biggest winners.
