SpaceX shares tumble 12%, fall below IPO price as AI spending concerns mount

SpaceX shares fell about 12% on Wednesday as concerns over heavy AI spending overshadowed the company’s faster-than-expected returns from those investments in its first earnings call since going public, Reuters reported.

The stock dropped to below $110 in early trading, well below its $135 IPO price less than two months after the company’s blockbuster market debut.

Investors questioned how long the profitable Starlink business could continue funding costly investments in data centres and Nvidia chips.


"With capex expected to remain elevated and investor enthusiasm cooling, I believe the stock could remain under pressure ahead of the lock-up expiration," Carolane de Palmas, market analyst at brokerage ActivTrades, told Reuters. "That could translate into significant volatility as markets reassess SpaceX's valuation and cash-burn trajectory."

SpaceX said its AI revenue more than tripled from a year earlier and announced several new cloud-computing agreements, even as quarterly AI-related capital expenditure rose to $15.8 billion.

Chief Financial Officer Bret Johnsen said returns from those investments were improving rapidly, but indicated that AI spending would remain high.

“The current economics have translated into a less than one-year payback on our new capital deployments for compute,” Johnsen said. He added that SpaceX had signed $6.7 billion in additional cloud-computing contracts since the second quarter ended and remained on track to reach an annualised revenue run rate of $100 billion by year-end.

That compares with traditional data-centre investments, which typically take several years to recoup their initial costs.

"Elon has continued to surprise investors on what innovation and technology can do, but there has always been a mismatch in terms of the ⁠time frame ‌of when that execution is going to occur," David Wagner, portfolio manager at Aptus Capital Advisors, said, referring to Musk's often-rosy outlook at his EV company Tesla that he has regularly missed.

"I believe the numbers. I would say that yes, those numbers are aggressive, but ⁠it's not a fantasy. The pieces exist, they just require flawless execution."

The post-earnings commentary marked a shift in the investment narrative around SpaceX.

Before the results, investors largely saw Starlink’s growing cash flow as the main source of funding for the company’s AI ambitions. Management now says the AI infrastructure business is generating enough revenue to help finance its own expansion.

To be sure, the company spent about $18.4 billion on capital expenditures during the quarter, roughly a fifth of the $85.7 billion it raised in its June IPO, and remained deeply free cash flow negative as it continued investing heavily in AI infrastructure.

SpaceX’s AI division brought in $2.6 billion in second-quarter revenue, more than three times its year-earlier figure, but remained unprofitable at the operating level.

The company nevertheless plans to sustain its heavy spending. Johnsen expects capital expenditure in each of the next two quarters to stay broadly in line with the second quarter as SpaceX builds out AI computing infrastructure, increases Starship production and develops its next generation of Starlink satellites.

“New compute capital monetises so quickly that it behaves more like cost of goods sold than capital expenditure,” said Michael Monaghan, portfolio manager of the Founders 100 ETF, which owns SpaceX shares.

SpaceX executives said demand for AI computing capacity continues to exceed supply and that the company expects to have more than two gigawatts of capacity by year-end. If demand remains strong enough to keep that infrastructure fully utilised, the AI business could increasingly finance its own expansion instead of depending on Starlink’s cash flow.