AI compute expansion opens up growth space! Bernstein raises SpaceX (SPCX.US) price target to $268; Morgan Stanley maintains "Overweight" rating.

As SpaceX (SPCX.US) accelerates the buildout of ground-based AI compute infrastructure and advances its Starship reusable technology and orbital data center plans, Wall Street investment banks remain optimistic about the company's long-term growth prospects. In a research report published on October 26, Bernstein raised its SpaceX price target from $248 to $268 and maintained its "Outperform" rating. Morgan Stanley, in its October 23 report, maintained its "Overweight" rating and $300 price target on SpaceX, arguing that the market has not fully reflected the potential value of the company's transformation from a space company into an integrated AI platform. Bernstein noted that the price target increase was mainly based on the accelerated pace of SpaceX's ground-based AI compute deployment and improved pricing prospects for compute services. Although valuations of AI-related stocks have pulled back recently, the firm believes that SpaceX's positioning in ground-based compute, satellite communications, and future orbital data centers is still expected to drive substantial revenue growth. According to the Bernstein report, SpaceX's third-quarter revenue reached $14.58 billion, above the consensus estimate of $12.88 billion; diluted earnings per share were $0.35, significantly exceeding the market expectation of $0.15. The company's business segments combined delivered operating profit of $2.79 billion, also well above the market expectation of $1.21 billion. Among these, the AI business became a growth highlight. SpaceX's third-quarter AI business revenue reached $7.56 billion, with operating profit of $431 million, both exceeding market expectations. Bernstein noted that this was mainly driven by faster-than-expected deployment of ground-based compute facilities and higher compute service prices. As of the end of the third quarter, SpaceX had approximately 1.7 gigawatts of nominal compute capacity. The company expects this scale to increase to 2.5 to 3 gigawatts by the end of 2026 and plans to reach at least 13 gigawatts by the end of 2027. Bernstein accordingly raised its forecast for the scale of SpaceX's ground-based AI compute buildout, projecting installed capacity of 2.8 gigawatts, 12.8 gigawatts, and 20.1 gigawatts by the end of 2026, 2027, and 2028, respectively. Meanwhile, compute service pricing has also become an important factor supporting SpaceX's growth prospects. The report noted that SpaceX's previously reached compute deals with customers such as Alphabet Inc. Class C were priced at approximately $30 to $50 per watt, while company management said that quotes obtained in recent negotiations with potential customers have been higher than that level. Although Bernstein raised its own compute pricing assumptions, its forecasts remain below the levels described by management. The firm expects SpaceX's average compute pricing to reach $26 per watt in 2027 and then decline as supply-demand dynamics gradually shift. However, aggressive AI infrastructure expansion also implies massive capital expenditure. SpaceX expects fourth-quarter capital expenditure to reach $35 billion to $40 billion, far above the previous market expectation of about $22 billion. Bernstein assumes that SpaceX needs to invest approximately $35 billion for each additional gigawatt of ground-based compute capacity. The firm believes that despite the high construction costs, if compute demand remains strong and contract pricing stays elevated, the related investments could still generate considerable returns. SpaceX management has set even more aggressive targets for future revenue growth. The company expects its annualized revenue run rate to reach at least $100 billion by the end of 2026 and believes that by the end of 2027 this figure could rise to $500 billion to $1 trillion, mainly driven by the ground-based AI compute business. By comparison, Bernstein's forecasts are more conservative. The firm expects SpaceX's full-year revenue to reach approximately $241.9 billion and $423.7 billion in 2027 and 2028, respectively, and raised its 2031 revenue forecast from $655 billion to $784 billion. Among these, the AI business is expected to become the largest revenue source. Bernstein forecasts that by 2031, SpaceX's AI business revenue could reach approximately $571.2 billion, with adjusted EBITDA of approximately $476.8 billion. Despite raising its earnings forecasts, Bernstein simultaneously lowered its valuation multiple for the AI business from 21x to 17x to reflect the recent pullback in AI-related stock valuations. This partly offsets the positive impact of compute business growth on the price target. In addition to the ground-based AI business, Bernstein believes that orbital data centers remain an important factor supporting SpaceX's long-term valuation. SpaceX plans to launch its first orbital data center by the end of 2027 and aims to begin operations in mid-2028. Bernstein noted that whether orbital data centers can be commercialized depends to a large extent on whether Starship can achieve full reusability, thereby significantly reducing space transportation costs. Under the company's plan, the 15th Starship test flight will attempt to recover both the booster and the spacecraft itself. If the test flight succeeds, SpaceX is expected to achieve spacecraft reuse for the first time on the 16th flight. Bernstein believes that a breakthrough in Starship reusability will provide an important foundation for orbital data center construction and may further improve the long-term economics of SpaceX's space business. Meanwhile, SpaceX's Starlink business continues to demonstrate strong profitability. In the third quarter, SpaceX's connectivity business revenue reached $5.25 billion, above the market expectation of $4.86 billion, with an operating margin of 45%, significantly exceeding the market expectation of 38%. Among these, Starlink consumer broadband subscribers increased by 1.6 million quarter over quarter to 13.6 million, with average revenue per user rising to $69. Although user growth has slowed somewhat, Bernstein believes that Starlink's profitability is improving faster than its user base is expanding. Enterprise and government connectivity performed especially strongly, with related revenue up 91% year over year in the third quarter. SpaceX management expects that over the long term, this business's revenue contribution could match or even exceed the consumer broadband business. The aviation internet market is also an important growth source. Bernstein noted that SpaceX has signed cooperation agreements with at least 46 airlines worldwide, covering approximately 12,000 aircraft, close to a quarter of the serviceable fleet. In addition, SpaceX is actively advancing satellite direct-to-cell service and exploring the possibility of building a ground-based mobile communications network. However, Bernstein believes that the related businesses still face high capital investment and execution risks, and therefore has not fully incorporated management's aggressive growth targets into its forecasts. Morgan Stanley takes a longer-term industry development view and is bullish on SpaceX. The firm believes that as AI investment gradually extends from data centers and software into physical industries such as manufacturing, Siasun Robot&Automation, energy, and space, the market will enter a phase of AI-driven physical economy development. Morgan Stanley calls this trend the "physical intelligence economy" and believes that SpaceX and Tesla, Inc. (TSLA.US) are expected to play important roles in this process. The report noted that the market currently still tends to view SpaceX's AI business as a traditional cloud computing infrastructure business and has not fully considered its vertical integration advantages in rocket launches, satellite communications, AI compute, and other technology areas. According to Morgan Stanley's valuation model, SpaceX's space and connectivity businesses are worth approximately $123 per share combined. Based on the approximately $145 share price used in the report, the market is assigning an implied value of only about $22 per share to its AI business. The firm believes this means SpaceX's AI business valuation remains low. Morgan Stanley expects SpaceX's net profit to reach approximately $133 billion in 2028. Based on the approximately $1.91 trillion market capitalization used in the report, its 2028 forward price-to-earnings ratio is approximately 14.3x, below the valuation levels of some large technology companies over the same period. Morgan Stanley maintained its $300 price target on SpaceX. Of this, the enterprise AI business contributes $166 per share of valuation, the connectivity business contributes $115, the X and Grok business contributes $11, and the space business contributes $8. In addition, Morgan Stanley also views the 15th Starship test flight as an important future catalyst for SpaceX. The firm believes that if SpaceX can successfully achieve dual recovery of both the Starship booster and the spacecraft itself, it will significantly reduce space transportation costs and improve the commercialization prospects of new businesses such as orbital data centers. Notably, Morgan Stanley also mentioned the possibility of further strengthening cooperation between SpaceX and Tesla, Inc., believing that closer strategic synergy between the two companies could help them integrate the large-scale capital and technological resources needed to develop the physical intelligence economy. However, such cooperation remains a potential scenario and not a confirmed transaction. Both investment banks believe that SpaceX's future valuation logic is no longer limited to traditional rocket launch and satellite internet businesses, but increasingly depends on the pace of AI compute infrastructure expansion, the commercialization capability of compute services, and whether Starship reusable technology can achieve key breakthroughs. However, the related growth prospects are still accompanied by high uncertainty. Bernstein emphasized that massive capital expenditure and volatility in AI industry valuations could limit stock price upside; Morgan Stanley cautioned that Starship reuse progress, AI business profitability, infrastructure construction costs, and potential financing needs could all affect SpaceX's future valuation performance.