Howmet (HWM.US) was frightened by “job robbers”! Citi and Bernstein shouted by mistake: SpaceX (SPCX.US) entry just means demand is too strong

The Zhitong Finance App learned that aerospace precision parts giant Howmet Aerospace (HWM.US) closed down 7.51% and fell sharply by 9% in the intraday period, hitting a two-month low, the biggest one-day decline since April 2025.

The trigger for the sell-off came from Musk's statement on social networking platform X. Musk said that SpaceX (SPCX.US) and Tesla (TSLA.US) are each working to build 100 gigawatts of solar production capacity per year, but natural gas power generation will still be the key support to fill the electricity gap in the next few years. He pointed out that the casting of turbine blades and guide vanes is currently the main obstacle limiting the increase in turbine production. If SpaceX produces these components on its own, the natural gas turbine can be put into operation by up to 18 months.

It was previously reported that SpaceX is building a blade and guide vane foundry in Bastrop, Texas. Musk's statement confirmed the plan's strategic intent at the official level for the first time. The facility is said to serve a planned 20 gigawatt power project, mainly to power an artificial intelligence (AI) data center, and the target is to be completed by the end of 2027.

Howmet is one of the few companies in the world capable of casting high-temperature blades and guide vane for industrial gas turbines. The gas turbine business has become one of Howmet's fastest-growing segments. The company's gas turbine revenue surged 39% year over year in the first quarter, while revenue growth for the full year of 2025 was 25%. Strong demand from AI data centers for power that can be quickly deployed has left the supply of turbine components in short supply, supporting Howmet's pricing capacity and stock price performance. SpaceX's entry into the market could theoretically divert Howmet's future orders and weaken the current bargaining advantage brought about by supply shortages. This is an important reason why Howmet was sold off on Monday.

However, according to Wall Street giant Citi, Howmet's decline has instead created potential buying opportunities. Citi pointed out that SpaceX's entry does not reflect HowMet's deteriorating competitive position, but rather strong demand and scarce turbine manufacturing capacity. The bank said that SpaceX mainly plans to produce these components for its own use, while continuing to purchase them from the existing industrial gas turbine supply chain. The news further highlights the critical nature of components manufactured by Howmet, and indicates that demand may exceed the company's industrial gas turbine revenue target of around $2 billion.

Citi's positive views are not limited to the gas turbine market. The bank describes Howmet as one of the leading mixed-growth companies in the aerospace and defense sector in its coverage, and notes that the company has record profitability, a huge backlog of commercial aircraft orders, a strong aftermarket business, and a growing defense aerospace business. Citi also emphasized that Howmet's engine products and fastening systems business has a profit margin of more than 30%, the company's balance sheet is strong, and capital allocation is beneficial to shareholders.

Citigroup said commercial aircraft manufacturers are still trying to increase production while demand for new aircraft still exceeds supply. This imbalance between supply and demand, combined with Howmet's aftermarket business, may provide a smooth wind for the company's profit growth for many years to come. The forecast expects Howmet's adjusted earnings per share to reach $5.37 in 2026, $6.76 in 2027, and $8.08 in 2028. As mentioned in the report, Citi's profit expectations for 2027 and 2028 are higher than market consensus. The bank maintained Howmet's “buy” rating and set a price target of $329. This target price still has room to rise by 34.3% compared to Monday's closing price.

Howmet is expected to discuss the future of the aerospace and industrial gas turbine business at upcoming investor meetings. Citi believes this could be a catalyst for the rise in stock prices. More details on additional capacity, customer commitments, and SpaceX's likely role in the supply chain will help determine whether the market's initial concerns about the competitive landscape will continue.

Furthermore, investment bank Bernstein also came to a similar conclusion. The bank's analysts said that SpaceX's move appears to be more driven by supply restrictions and a desire to strengthen control over the supply chain rather than dissatisfaction with Howmet. Producing turbine blades that can withstand extreme heat and mechanical stress requires specialized casting equipment, technical expertise, and complex coating processes, thus posing a major barrier to rapid entry into this field. Bernstein maintained Howmet's “outperforming the market” rating and raised the target price from $248 to $328.

Bernstein also questioned whether SpaceX could establish large-scale production capacity within the 18-month schedule proposed by Musk. The bank also said that SpaceX is unlikely to replicate every step of the existing mature manufacturing process, and even if production is successfully achieved, it is likely that the output will mainly be used to meet its huge electricity needs rather than compete broadly with existing suppliers.

Meanwhile, Howmet is also expanding its turbine blade business. Bernstein said that the new production capacity was put into operation in the second quarter, and it is expected that at least 6 additional production expansion projects will be launched by the end of the fourth quarter. Overall, these projects could increase production capacity by up to 38% compared to the first quarter of 2025.

Howmet has also signed agreements with major turbine manufacturers extending until 2030. The contract requirements corresponding to these agreements are consistent with Musk's statement that the shortage of turbine components may continue until the end of this decade, and supports the view that SpaceX's increased production may drive an increase in overall turbine deployment rather than just crowding out Howmet's sales.

Overall, for investors, the core issue is probably not whether SpaceX can produce some of the turbine blades on its own, but rather whether the demand for electricity brought about by artificial intelligence infrastructure is growing fast enough to allow all qualified producers to operate at full capacity. Both Citi and Bernstein believe that this news shows that the entire industry is facing insufficient production capacity, and this industry background may ultimately strengthen Howmet's market position rather than weaken it.