SpaceX has begun expanding into the AI computing market. Is this a threat to CoreWeave and Nebius?

SpaceX’s entry into the AI computing market threatens the positions of CoreWeave and Nebius, analysts at BNP Paribas and Bernstein Research have warned. In their view, SpaceX’s relationship with Nvidia could grant it priority access to hard-to-find chips. As a result, it will be more difficult for CoreWeave and Arkady Volozh’s Nebius to procure equipment and expand their data centers.

SpaceX uses chips from only one manufacturer. “There is concern that Nvidia will let SpaceX jump the line for AI chips—even ahead of the specialized cloud providers that it helped establish,” analysts at Bernstein Research, led by Madison Rezaei, warned (as quoted by MarketWatch).

Another advantage SpaceX has is money. Smaller competitors, which cannot spend comparable amounts on infrastructure, will find it harder to purchase electricity for their data centers on favorable terms. In that case, even agreements with Nvidia won’t be of much help, Bernstein warned.

BNP Paribas analyst Stefan Slovinski contrasts SpaceX with Meta, which also plans to sell computing power to large clients. However, Meta intends to use a significant portion of that capacity to develop its own AI models. Mark Zuckerberg stated that monetizing AI will yield “significantly higher margins” than directly selling computing power. This prioritization has eased investor concerns and bolstered the stocks of specialized cloud providers. According to Slovinsky’s assessment, SpaceX is operating much more aggressively, MarketWatch reports.

Second-quarter results may shed light on the situation: CoreWeave will report its results on August 11, and Nebius on August 12. According to FactSet, Wall Street expects both companies to report an increase in their loss per share. CoreWeave’s revenue is expected to more than double, while its debt is projected to rise from $25 billion in the first quarter to $33 billion. Nebius is expected to report a 442% year-over-year increase in quarterly sales to $570 million, according to MarketWatch.

Elon Musk's company is investing billions of dollars in the construction of data centers and is trying to make its AI division profitable. Demand for computing power could push SpaceX to an annual revenue rate of $100 billion by the end of the year, Musk said.

Last quarter, SpaceX signed contracts with Alphabet, Reflection AI, and Anthropic. Another agreement is set to take effect in October. The client could be the U.S. Department of Defense or a tech giant like Microsoft.

According to FactSet, the consensus rating for all three data center providers is “Overweight” (meaning “above market,” which corresponds to a recommendation to buy the stock). Thirty out of 40 analysts have assigned Buy or Overweight ratings to SpaceX shares, seven have assigned Hold ratings (neither buy nor sell), and only three have assigned Sell or Underweight ratings (a recommendation to sell). CoreWeave has 28 positive ratings out of 42, 12 neutral ratings, and two negative ratings. The proportions are similar for Nebius: 11 Buy or Overweight recommendations, six Hold recommendations, and one Sell recommendation.

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