SpaceX’s $US2 trillion valuation hinges on AI hype, Starlink dominance and Elon Musk’s biggest promises yet

SpaceX’s transformation from a rocket company into an AI infrastructure powerhouse is beginning to reshape the investment case for Elon Musk’s most valuable business.

The US trillionaire’s company swung to a $US4.4 billion ($6.3b) profit in the three months to September 30, sending shares higher in futures trading and giving supporters another reason to believe its outlandish $US2 trillion valuation is justified.

SpaceX is now building a business around three distinct engines; eye-catching rocket launches, Starlink’s satellite internet network and a rapidly expanding AI infrastructure operation.

Musk says SpaceX could soon hit $US1 trillion in revenue

On Wednesday’s earnings call, Mr Musk’s active imagination even led him to boast there’s a “small chance” the growth in its AI infrastructure and agent services could send annualised revenue soaring to $US1 trillion by 2027.

“In a nutshell what this implies for SpaceX annual recurring revenue by end of 2027 is somewhere between $US500 billion and $US1 trillion,” Mr Musk said.

Against current annualised revenue of about $US58 billion, that would represent, almost, unbelievable growth.

Mr Musk offered little detail to back up the forecast for sales to jump up to 18-fold in 12 months, but that won’t matter to his loyal supporters and fellow shareholders all with a financial interest in him talking up the share price — as high as possible.

For the September quarter, its AI data centre or infrastructure business, named “Super Intelligence”, nearly tripled its total revenue to $US7.6 billion, accounting for more than half the group’s revenue of $US14.5 billion.

As Mr Musk tells it, the shift is significant. Because he argues SpaceX’s ability to launch rockets means it will soon own an AI-powered infrastructure platform and communications network.

The other crucial piece of the SpaceX puzzle is Starlink, according to Mr Musk.

Starlink could disrupt mobile providers

SpaceX’s reusable rockets launch the satellites that deliver a global internet network. This means SpaceX controls the space infrastructure behind the tech and the complexity of space launches means competition looks limited, at least for now.

For the quarter, Starlink posted around $US2.4 billion of operating profit, equivalent to 86 per cent of SpaceX’s total operating profit.

The profits from Starlink, alongside cash raised from equity or debt investors are what’s funding the AI data centre buildout and Mr Musk’s moonshot bets across space exploration.

Starlink now has 13.6 million consumer subscribers across 174 countries that rely on it for internet connectivity in remote areas beyond the reach of traditional terrestrial networks.

Starlink also has a substantial user base in rural Australia and partners with Telstra to fill some gaps in the telco’s network.

Bullish investors argue Starlink could eventually provide a mobile and internet network to compete with land-based mobile networks or phone towers.

Telstra has played down the threat. However, its shares have wobbled since SpaceX’s October 8 announcement that it’ll push harder into US mobile connectivity.

The Starlink system is also sold to governments and plays a vital role supporting Ukraine’s military in its war against Russia to guide drones on the battlefield.

Commercial airlines are another growing market, with carriers adopting Starlink to provide high-speed internet in flight.

Qantas is yet to get on-board, but SpaceX’s chief operating officer Gwynne Shotwell said Korean Air, Swiss Air, Lufthansa, Asiana Airlines and Austrian Air were among carriers to sign up in the September quarter. It’s already widely used on internal US flight networks.

Valuation worries, Tesla merger

The three parts of SpaceX, their complex growth outlooks and vastly different financials, mean the company’s $US2 trillion valuation remains divisive.

It posted 37 US cents in earnings per share for the September quarter. This means the Nasdaq-listed shares at $US147.80 trade on almost exactly 100 times annualised profits.

Supporters argue the multiple is justified by SpaceX’s dominant position in commercial launches, Starlink’s growth potential and the prospect that its satellite network becomes a foundational part of global communications infrastructure.

The question is how much of the expected growth is already embedded into a $US2 trillion valuation.

For now, almost 90 per cent of operating profit is coming from the data-centre operation, making SpaceX’s fortunes tied to the soaring global demand for AI compute.

On the share market its value is likely to swing as much on animal spirits, cheap money, and retail investor enthusiasm for Musk’s exaggerated claims.

The final wild card is Musk himself. The erratic billionaire has previously floated the possibility of a merger between SpaceX and Tesla, the electric vehicle company he also leads.

“Do I think it would be a good idea? Yes,” Mr Musk told the earnings call. “But at the end of the day, the shareholders have to be supportive of this.”