By William Gavin

As Elon Musk aims to increase SpaceX's computing capacity exponentially, he'll face challenges related to funding, power supply and simply securing enough chips

SpaceX CEO Elon Musk has set major targets for his company's artificial-intelligence division.

Even some of the most breathless SpaceX bulls aren't sure CEO Elon Musk will be able to achieve the bold targets he's laid out for the company's artificial-intelligence business.

Selling AI computing power has quickly become a major business for SpaceX, enough to account for more than half the company's revenue in the latest quarter and likely a much greater share in the quarters to come.

The latest targets from Tuesday's earnings call show just how rapidly this part of the business could expand. As of the end of the September quarter, SpaceX had less than 2 gigawatts of AI computing power online at its data centers. It's aiming for 2.5 to 3 gigawatts by the end of this year before capacity ramps dramatically from there.

Musk is "fairly confident" the company will bring online another 10 gigawatts of computing power in 2027, he said, and there is a "nonzero possibility" SpaceX has more than 20 gigawatts online by the end of next year.

"I would be surprised if we brought on less than 13 gigawatts of compute by the end of next year," Musk added on SpaceX's third-quarter earnings call.

For scale, just a single gigawatt is enough to power roughly 750,000 homes for a year. Musk is hoping for enough to power about 15 million households. Building that much capacity so quickly is going to be very expensive, not to mention difficult. There are various roadblocks, such as securing massive amounts of graphics processing units, paying for all of those, navigating political resistance to data centers and obtaining sufficient power.

SpaceX's ability to achieve its computing-power goals - or even get close to them - matters to investors for a number of reasons. For one, the AI narrative is what's fueling SpaceX's stock and underpinning upbeat forecasts.

J.P. Morgan's Doug Anmuth now thinks SpaceX's stock (SPCX) could hit $500 - more than tripling from current levels - based on a valuation framework that assumes the company could exceed $24 in earnings per share for 2028 as cloud momentum builds. For context, SpaceX is expected to report a loss this year, and Anmuth's 2028 target is nearly three times what the average analyst tracked by FactSet is forecasting.

Anmuth thinks SpaceX will have 10 gigawatts of computing power to end 2027, he said. He wrote that his recent estimate increases are "substantial" and that "a lot has to go right for SPCX to hit these numbers including successfully building out the compute, securing significant capital, [and] continuing to benefit from a very strong demand environment."

Meanwhile, Morgan Stanley's Adam Jonas models 8.3 gigawatts by the end of next year, citing a "lack of clarity on securing power, steep execution risks, and financing overhang."

Gil Luria, head of technology research at D.A. Davidson, told MarketWatch that tripling - let alone sextupling - SpaceX's compute capacity in 2027 "does not seem realistic." Luria added that he considers Musk's comments to be "aspirational," indicative of his faith in SpaceX and the durability of demand for computing power.

The other main reason that SpaceX's cloud targets matter is the sheer amount of money that the company is doling out in pursuit of its ambitions here. Jonas forecasts 2027 capital expenditures, or spending on physical infrastructure, at roughly $278 billion, 87% of which would be allocated to AI-related plans. That would be a massive increase compared with the $86 billion that Jonas projects SpaceX to book this year.

Experts say SpaceX will likely need to take on more debt to fund its buildout.

Bret Johnsen, SpaceX's chief financial officer, said on Tuesday's third-quarter earnings call that SpaceX has the advantage of a "very strong balance sheet," an investment-grade rating and "a number of available pools of debt," Earlier this year, SpaceX announced a $25 billion bond deal.

The company is also reportedly planning to borrow some $40 billion to help buy Nvidia (NVDA) chips in a deal set to close in 2027. Deutsche Bank's Edison Yu estimates that SpaceX's spending next year will be backed by $140 billion of debt and structured financing.

While analysts say SpaceX likely has little need to worry about being able to issue new debt, cracks in the AI boom have started to emerge, namely around CoreWeave (CRWV). Nearly $450 billion in global AI-related debt has been issued this year, up from $216 billion last year, according to Morgan Stanley.

"For bondholders, the most important takeaway was that SpaceX's earnings power is now growing fast enough to keep pace with its extraordinary spending plans; the company still needs significant capital, but this quarter made the path to funding that growth much more credible," said Matt Woodruff, head of aerospace and defense at Fitch Solutions CreditSights.

SpaceX maintains that it can make back what it spends to add computing power in less than a year, which could limit how much it needs to lean on financing. Radio Free Mobile analyst Richard Windsor estimated that the spot price for short-term compute contracts is somewhere between $30 billion and $50 billion per gigawatt.

However, Windsor said, the market may normalize, possibly as soon as next year, and the price per gigawatt could drop to around $20 billion - eating into SpaceX's margins. In the meantime, SpaceX has given the AI industry "a much-needed boost," Windsor wrote in a research note.

SpaceX shares were up 7.8% in Wednesday trading before dipping 0.5% in after-hours trades.

-William Gavin

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10-21-26 1615ET