SpaceX's $8.1 Billion Pentagon Haul and a $60 Billion AI Bet Collide With a Wall of Skepticism

SpaceX lands $8.1B in Pentagon contracts and acquires Cursor, but shares remain 38% below peak amid valuation debates and heavy spending.

The bull case for SpaceX has never been louder — and neither has the caution. Within the span of a single week, the company locked in $8.1 billion in Pentagon contracts, closed a $60 billion all-stock acquisition of AI coding startup Cursor, and watched its most prominent long-term backer project a valuation of up to $40 trillion within fifteen years. Yet the shares closed Friday at €120.96, still 38 percent below their June peak of €194.46.

That gap between ambition and market reception captures the central tension animating SpaceX's young life as a public company: the growth story keeps expanding, but so does the bill for funding it.

Starlink's subscriber surge fuels the Baron thesis

Ron Baron, founder of Baron Capital, used a Friday appearance to lay out a scenario in which SpaceX reaches a valuation between $20 trillion and $40 trillion over the next decade to decade and a half, powered by Starlink's expansion and the buildout of orbital AI infrastructure. The projection is the most aggressive yet in a debate that has produced wildly divergent price targets, from a bearish $63 fair value to a bullish $300.

The data behind Baron's optimism is real. The FCC reported Thursday that Starlink's U.S. subscriber count has surpassed 7 million, up from roughly 2 million at the end of 2025. Musk, for his part, told employees at an internal meeting that global consumer subscriptions exceed 13 million, with another 22 million monthly users of the "Starlink Mobile" service.

That momentum, however, has not converted the skeptics. Morningstar's Nicolas Owens initiated coverage in early August with a sell-equivalent rating and a fair value of just $63 per share, arguing that the returns on AI-related capital spending are already priced in at levels that won't materialize. Daiwa Capital Markets trimmed its price target Thursday to $140 from $175, holding a neutral stance and pointing to the heavy cost of the company's capital-intensive expansion.

Pentagon contracts and a European foothold

The government side of the business took a decisive step forward Wednesday when the U.S. Department of Defense awarded SpaceX missile-defense contracts worth $8.1 billion. The package includes $2.29 billion for the Space Data Network communications backbone and $4.16 billion for the Airborne Moving Target Indicator satellite constellation.

Europe is next in line. Italy is reportedly negotiating a five-year, $1.6 billion deal for Starlink Starshield, with preliminary approval already granted by the country's intelligence service and defense ministry. If finalized, the agreement would cement SpaceX's role as a security-critical satellite infrastructure provider on the continent.

The defense windfall arrives alongside an aggressive push into AI. The Cursor acquisition — completed Friday via the issuance of roughly 29.1 million restricted stock units and 44.4 million options on Class A shares — gives SpaceX ownership of one of the most talked-about AI coding platforms. Musk told staff Tuesday that AI infrastructure revenue should surpass all other business lines by September 2026, with a target of 10 gigawatts of compute capacity by the end of 2027.

The numbers behind the narrative

SpaceX's first public quarterly results, reported for the second quarter, showed revenue of $7.81 billion, up 92 percent year over year, with a net loss that narrowed to $541 million. The company held $100 billion in cash as of June 30 and carried a backlog of $47.5 billion. Starlink was the sole profitable segment, posting $1.66 billion in operating income as consumer subscriptions climbed to 12 million.

But the scale of what comes next gives even constructive analysts pause. Piper Sandler cut its price target to $140 from $156, citing projected capital expenditures of $65 billion in 2027 alone — a figure that puts the Baron projection in perspective and underscores just how capital-hungry the growth trajectory remains.

Morgan Stanley, by contrast, reaffirmed its overweight rating Wednesday with a $300 price target, estimating the AI segment could reach an annualized run rate of $8 billion by year-end. Argus upgraded the stock the same day from hold to buy, setting a $160 target following the quarterly revenue surge.

A busy launch manifest and a pivotal test flight

The operational engine keeps running. Wednesday saw two separate Falcon 9 missions from Florida and California deliver 53 Starlink satellites to orbit within hours of each other. Later this month, Starship Flight 14 is scheduled to attempt its first orbital payload deployment, with a planned catch of the upper stage by the launch tower — pending final regulatory approval.

The week's news flow was enough to push the stock up 5.1 percent on a weekly basis despite Friday's 1.2 percent dip. But the persistent 38 percent discount to the 52-week high suggests the market remains unconvinced that the current valuation — caught between a $63 fair value on one end and $300 price targets on the other — has found its equilibrium. The analyst spread reflects a deeper disagreement about what SpaceX will ultimately become: a defense contractor, a connectivity utility, or the backbone of orbital AI. The answer will determine whether Baron's trillion-dollar vision looks visionary or merely optimistic.