SpaceX is stuck in a difficult adolescence

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The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Robert Cyran
NEW YORK, Oct 20 (Reuters Breakingviews) - What will SpaceX SPCX.O be when it grows up? The limitless possibility of a long-prolonged corporate adolescence supported the rocket, satellite network and artificial intelligence company’s ascent to a $2 trillion valuation. Results released on Tuesday highlight the quick returns boss Elon Musk has gleaned from opportunistically expanding into new areas like renting out chips for chatbots. Yet that business could soon erode, leaving the impulsive CEO to search out yet another focus from the many available.
SpaceX said that its AI and server-rental unit – renamed to “Super Intelligence,” following President Donald Trump’s preferred terminology – generated an astonishing $7.6 billion of revenue in the third quarter, an 829% increase from last year. This surprise success was the product of arrested development: Musk wanted to run a top AI lab, yet his Grok bot’s also-ran status left its data centers underused. More-popular rivals like Anthropic conversely face a shortage, and paid top dollar to get chips now.
This happy accident is now SpaceX’s biggest business line, overtaking its original core focus of putting satellites into orbit with reusable rockets. Chief Financial Officer Bret Johnsen boasted in September that ⁠incremental investment in Super Intelligence pays back rapidly, and so the company has said that it could increase capacity perhaps five-fold by the end of next year.
High returns, however, stem from chip shortages, which have lifted rental prices above where they were last year. Markets seem to expect this situation to wane: the price to rent out Nvidia GB300 silicon is about $10 an hour for the next several months, analysts at MoffettNathanson estimated, but only $4 further in the future. If AI demand is lower than expected, or chief clients like Anthropic are stretched too thin, prices could plummet lower.
If becoming a cloud operator is just an adolescent phase for SpaceX, then what’s next? There’s always enterprise software, like the promised “Macrohard,” an AI platform to augment workers. The company’s satellite broadband business threatens to take on wireless networks worldwide. And SpaceX is building a $17 billion, 100-million-square foot plant for fabricating semiconductors with partner Tesla TSLA.O. If Musk chose to jam together the two companies fully, cars and robots are added to the menu.
Rockets, ironically, fade into obscurity. Revenue for SpaceX’s namesake business grew only 6% compared to last year. It is simply too small to justify such a wild valuation, which was 94 times estimated earnings over the next year before quarterly figures were released. Yet the company dominates the market for putting stuff into orbit, while electric vehicles are beset by rising Chinese rivals, some 200 companies build AI data centers for hire, and countless robot developers pop up. Endless opportunity beckons, just not in the places where SpaceX is actually mature.
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CONTEXT NEWS
SpaceX said on October 20 that it generated $14.6 billion of revenue in the third quarter, compared to $5.6 billion in the same period a year prior. The company’s Super Intelligence segment produced revenue of $7.6 billion, up from $813 million a year ago.
The company earned $4.4 billion of net income, as opposed to a $1.1 billion loss a year ago. Capital expenditures nearly tripled to $19.6 billion, as the company invested $16.4 billion in Super Intelligence.

(Editing by Jonathan Guilford; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))