Elon Musk founded Space Exploration Technologies (NASDAQ: SPCX) in 2002 with a simple but ambitious goal: to drive down the cost of space transportation. The company has since expanded into satellite internet connectivity and artificial intelligence (AI), unlocking significant revenue streams that paved the way for its recent initial public offering (IPO).
SpaceX stock quickly soared to a peak of $225 after its June listing, but it has since declined by 29% to $159.31 (as of the market close on Wednesday, Oct. 21). The company is growing rapidly, but investors remain hesitant due to its sky-high valuation.
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However, while discussing SpaceX’s third-quarter operating results last Wednesday, Musk provided a mind-blowing revenue forecast for 2027 that actually makes the stock look like a bargain at the current price. But is it achievable?
SpaceX CEO Elon Musk. Image source: The White House.
$1 trillion in annualized revenue by the end of 2027?
Around 90% of the world’s satellites and other space-bound commercial payloads are launched into orbit using SpaceX rockets such as the Falcon 9, Falcon Heavy, and the new Starship. The company currently sends around 2,500 tons’ worth of payloads into orbit each year, but Musk believes that figure could grow to 10 million tons in the future, particularly as space becomes the preferred destination for AI computing infrastructure.
On that note, most of SpaceX’s current revenue comes from its super intelligence (SI) business. The company acquired Musk’s xAI start-up back in January, which included the Colossus and Colossus II data centers, and the Grok family of large language models. SpaceX leases computing capacity from the Colossus data centers to other businesses like Anthropic and Google parent Alphabet, which has become a very lucrative practice.
But Musk says Grok Bot — SpaceX’s autonomous AI agent — has become the fastest-growing product he has ever seen. It’s still in beta mode, but he says usage per customer is growing over time, suggesting enterprises are extracting significant value from it.
Data source: Space Exploration Technologies.
Musk wants to have the world’s most powerful AI training cluster online by mid-2027, consisting of 440,000 Nvidia Vera Rubin graphics processing units (GPUs). Grok Bot is likely to use a lot of this capacity, but it will also make SpaceX one of the most sought-after infrastructure partners in the entire AI industry.
As a result, Musk believes the SI business could catapult SpaceX’s annualized revenue to somewhere between $500 billion and $1 trillion by the end of 2027. In practice, that means he expects the company to achieve between $41.7 billion and $83.3 billion in monthly revenue by December next year.
SpaceX stock is expensive in the here-and-now
SpaceX generated just $32 billion in total revenue over the last four quarters, so Musk’s forecast implies incredibly ambitious growth, to say the least.
SpaceX stock is currently trading at a trailing price-to-sales (P/S) ratio of 67.5, making it 10 times as expensive as the technology-heavy Nasdaq-100, which has a P/S ratio of 6.7. Therefore, it’s no surprise investors are hesitant to pile in. But if we assume the company achieves $500 billion in annualized revenue by the end of 2027, its forward P/S ratio could fall to as low as 4.3 in the next 15 months or so.
It’s worth noting that Wall Street’s average forecast (from Yahoo! Finance) suggests SpaceX will generate just $167 billion in revenue next year, so achieving $500 billion to $1 trillion in revenue, even on an annualized basis, by December would be a monumental achievement.
SpaceX could hit Musk’s target in the long term
In the future, there will be incredible synergies between SpaceX’s SI and connectivity businesses. The company developed a new satellite called Starmind, which is fitted with a variant of Nvidia’s Vera Rubin system. It’s designed to process AI workloads in space, where it will run on solar energy and won’t require a complex cooling solution. Beaming data back to Earth is the tricky part, but SpaceX has already solved that problem.
More than 11,000 of the company’s Starlink satellites are currently in orbit, and they beam internet connectivity to consumers and enterprises here on Earth. Starlink had 13.6 million paying subscribers at the end of the third quarter, up 89% from the year-ago period. However, longer term, this could be the ultimate data distribution network for space-based AI infrastructure.
In fact, Musk thinks SpaceX will eventually deliver 100 times the bandwidth of the existing Starlink constellation, thanks in part to the company’s new V3 satellites, which offer 10 times the bandwidth of the previous generation. The new Starship rocket recently launched 26 terabits’ worth of satellite bandwidth into orbit, which was equivalent to 10 Falcon 9 launches — and it was only half full.
No other company (or government, for that matter) in the entire world can match SpaceX’s trajectory in this area. While I personally wouldn’t buy the stock today given its hefty valuation, I do believe investors committed to holding it for the next five to 10 years can earn positive returns.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.
