SpaceX (SPCX.US) under a $500 billion growth vision: Damo is betting on the explosion of AI computing power, and “big bears” are wary of bubbles

The Zhitong Finance App learned that the “AI+ Space Exploration” supergiant SpaceX (SPCX.US), founded and led by Musk, rebounded strongly last Friday after experiencing a sharp decline caused by the Democratic Party sweeping both houses of the Senate and the House of Representatives in the midterm elections. Wall Street financial giant Morgan Stanley (“Damo”) is still optimistic that the company's stock price is expected to rush to $300, while “big short” Michael Burry questions that the company's overvaluation cannot continue and is at the forefront of the “AI bubble” crisis. The real difference between the two sides is whether ExSPAC can turn the synergy of rockets, satellite communications, and AI computing power into a continuous cash flow sufficient to support the trillion dollar valuation.

On November 5, SpaceX fell 9.05% to close at $123.62; the next day, it rebounded 8.62% to close at $134.27, yet to fully recover Thursday's losses. Based on Friday's closing price, the Daimo's target price of 300 US dollars corresponds to an increase of about 123.4%, but the pessimistic scenario of SpaceX 75 given by the Daimo analyst team also means a downside of about 44.1%. The huge distance between target prices reflects very different assumptions about technology deployment, speed of commercialization, and capital supply.

Michael Burry, who has the title of “Big Short” and is one of the prototype characters in the movie “The Big Short,” continues to warn of AI overvaluation, return on capital expenses, and the risk of crowded transactions through Substack columns, and uses tools such as put options to express his judgment. He has previously shorted popular stocks such as Nvidia, Micron, Tesla, and Applied Materials, but has recently adjusted his allocation to focus his bearish exposure on NASDAQ and semiconductor-related tools.

The latest notable change is that Bury sold 25% of Vaneck Semiconductor ETF put options during the collapse of technology stocks on November 5, partially cashed out profits, while retaining large-scale remaining positions, and continued to be bearish on QQQ (Nasdaq 100 Index ETF), Palantir, Oracle, and Caterpillar. These latest bearish position bets continue to show that he is still betting on valuation and capital expenditure cycle adjustments in the AI investment boom, while actively managing his exposure based on how much the market falls.

Damo and Bury's valuation differences: Who will pay for SpaceX's future?

SpaceX's stock price remains extremely volatile. Currently, its stock price is about 17% lower than the closing price on the first day of listing in early June. Since this year, the stock has rapidly fallen by more than one-third of its market value several times before rising by more than 50%. The market doesn't seem to be able to agree on SpaceX's valuation, and so are these top Wall Street experts.

Judging from one indicator, most Wall Street analysts are quite in agreement on SpaceX stock. Of the 35 analysts covering this space stock, 29 gave a “buy” rating, 6 gave a “hold” rating, and only 1 gave a “sell” rating. The agreed price target is around $250, which means more than 86% of potential upside.

However, a closer look reveals that the divisions within Wall Street are quite obvious. Some bullish analysts are targeting prices below $200, while others are as high as $500. Morgan Stanley is in between, with a target price of $300, which means there is room for growth of more than 124% over the next 12 months.

Legendary investor Michael Berry doesn't agree. This hedge fund manager earned investors billions of dollars by shorting the US real estate market during the financial crisis from 2008 to 2009.

“There's nothing in that S-1 document that proves it's worth $1 trillion, let alone $2 trillion.” Bury warned this summer. What he meant was SpaceX's initial public offering prospectus. The valuation rose further after SpaceX went public, making Bury more cautious. He stressed, “At a market capitalization of $2.8 trillion, SpaceX is essentially a small space company, a telecommunications company targeting a segmented market, a troublesome social media company, and a simplified version of CoreWeave, but its total revenue is less than $20 billion.” “Any increase will be driven by hype and technical factors.”

Why is Morgan Stanley still so bullish on SpaceX given these concerns? The target price of $300 boils down to a few key assumptions.

Why is Morgan Stanley optimistic about SpaceX stock?

Almost all analysts covering SpaceX and taking a bullish stance are focusing on one key business sector: artificial intelligence. According to SpaceX's own prospectus, AI accounts for more than 90% of the company's total potentially serviceable market. Therefore, any bullish view of SpaceX stock can be considered to include optimistic assumptions about its AI business.

However, it's not just SpaceX's AI business that Morgan Stanley is optimistic about. Analysts in the bank's investment business department are also optimistic that the company's other businesses will form a synergy with the AI business.

“We believe the company is one of the few platforms that can integrate orbital space resources, global connectivity services, and computing power into a single infrastructure system,” Morgan Stanley analysts explained.

In another report, the agency emphasized that SpaceX's AI business is “the part of SpaceX's investment logic that we believe has the greatest potential for growth.” The agency added that rockets and satellites will be the key to generating AI revenue. This is because SpaceX's Starship rocket will play a key role in launching satellites into orbit at a lower cost and on a large scale.

At the same time, these satellites can not only be used by SpaceX's Starlink division to provide more connectivity services — a business that currently contributes significant cash flow to the company's profits — but also to support orbital data centers. Orbital data centers may put SpaceX ahead of other large technology competitors in terms of cost and resource availability; however, the economic viability of space data centers, as well as technical and physical limitations, remain questionable.

This is the main difference between Bury and Morgan Stanley when looking at SpaceX shares. Morgan Stanley believes there are synergy effects between SpaceX's business segments, and expects these synergy effects to drive significant growth in the AI business. By contrast, Barry was more skeptical.

Notably, in their pessimistic scenario, Morgan Stanley analysts also acknowledged that Bury's pessimistic valuation could be realized.

The Morgan Stanley analyst team explained, “Our pessimistic scenario target price of $75, assuming Starship's progress is delayed until 2029, AI commercialization and deployment will fall short of expectations, making the aerospace and connectivity business account for about 90% of the company's valuation.” “Being able to obtain the required capital is one of the biggest risks we anticipate facing.”

Morgan Stanley's bullish scenario depends on SpaceX continuing to raise huge amounts of additional capital for the rest of the decade. Berry's argument essentially centered on one thing: betting on SpaceX's three business segments succeeding and collaborating at the same time while continuing to obtain capital at an affordable cost for many years to come is a difficult decision to make.

According to some cautious investors, it's hard not to agree with this concern. This is why, like Bury, some investors do not go long or short on SpaceX shares, but instead choose to wait and see for a long time. This also largely makes it difficult for SpaceX's stock price to show a continuous breakthrough upward trajectory.

Strong rebound after a sharp decline: the core of the SpaceX deal is whether growth can overcome financing and policy constraints

The recent market sell-off initially impacted the fulfillment expectations of SpaceX's terrestrial AI expansion. After the Democratic Party won majority control of the Senate and House of Representatives and key state elections such as Texas, the market is concerned about stricter data center approvals, cost sharing, and community supervision, while re-evaluating the regulatory scrutiny that Musk's companies may face.

For SpaceX, project delays not only mean revenue delays, but may also cause equipment, financing, and construction expenses to occur before cash recovery, reducing the turnover efficiency of invested capital. Therefore, stock price adjustments have a clear market-level management and valuation transmission path, and cannot simply be reduced to the failure of Musk's Republican political bets.

The growth outlook released by Musk at the Barron Investment Conference on November 6 provides a new basis for the bulls: he expects SpaceX's revenue to increase by about 70% month-on-month in the fourth quarter, and reaffirms that the annualized revenue scale in December 2026 will exceed 100 billion US dollars, and that in December 2027 it may exceed 500 billion US dollars.

However, it should be noted that what is described here is the scale of annualized revenue at a specific point in time, not the annual revenue that has been achieved or officially promised for the corresponding year; he clearly refers to the 2027 judgment as a personal expectation rather than a promise, and only estimates the possibility of 1 trillion US dollars in annualized revenue of about 2%.

Needless to say, SpaceX's growth focus is rapidly shifting to focus on the delivery of AI computing power resources to big customers such as Google, Anthropic, and OpenAI, and what the market needs to verify is whether AI GPU/TPU/ASIC procurement, power supply, construction, and system integration can be simultaneously transformed into strong computing expansion capabilities with sustainable charges.

SpaceX's third-quarter revenue reached 14.575 billion US dollars, an increase of 161% over the previous year; the super intelligence business revenue was 7.56 billion US dollars, accounting for about 52% of total revenue. However, this sector also includes infrastructure, models, software, and advertising businesses, and cannot all be considered computing power leasing.

Meanwhile, capital expenditure for the third quarter reached US$19.593 billion, higher than current quarter revenue. This financial structure explains the long and short differences: rapid growth expands future profit margins, but continued investment also increases the company's requirements for external financing and the speed of project repayment.

Damo's core judgment is that SpaceX can combine the advantages of multiple links: Starship reduces deployment costs through reuse and large capacity, Starlink expands connectivity service revenue, and orbital computing is expected to open up new computing power supply space. At the conference, Musk predicted that the StarMind computing device co-designed with Nvidia will be launched as soon as the third quarter of 2027, deployment will be expanded in 2028, and further expanded in 2029. However, this is still the expected timeline. What really needs to be verified at the investment level is whether a low-cost launch can be combined with power supply, heat dissipation, communication, and equipment reliability to form a competitive full-life cycle cost; only if these links are established at the same time can orbital computing power be transformed from a technological choice into a sustainable source of profit.

Funding channels are still providing support. SpaceX has obtained a binding commitment of approximately US$40 billion in financial leases for Nvidia's Vera Rubin equipment and ground computing power. It is expected to be completed before the end of the year after meeting the delivery conditions. The equipment is scheduled to be delivered in the first half of 2027.

On the other hand, Damo estimates that the company may need to issue about $230 billion in debt from 2027 to 2029, indicating that its optimistic valuation itself is based on the capital market's continued support for expansion. The key to judging whether Damo or Bury is closer to the final results is whether the new revenue can continue to cover equipment renewal, operating and financing expenses, and drive improvements in free cash flow. Damo is betting that this path can be realized, and Burry questions whether the market has paid too much of a premium for success in advance.