SpaceX's AI Bet Is Starting to Outgrow the Rocket Business

TD Cowen starts SpaceX at Buy with a $200 target, projecting AI compute leasing at $66 billion in 2027, about 58% of revenue.

SpaceX has spent years being valued as a launch company that happens to run a satellite network. TD Cowen thinks that framing is about to invert. The research house initiated coverage of the stock on Tuesday with a Buy rating and a $200 price target, arguing that leasing terrestrial computing capacity for artificial intelligence could generate more revenue than every other SpaceX business line combined by early 2027.

The market's reaction was measured rather than euphoric. On European trading venues the shares added 3.0% to EUR 131.82, leaving the stock 11% above its 50-day moving average of EUR 119.17.

A revenue mix in the middle of a rewrite

Analyst John Blackledge projects AI compute leasing will bring in $14.4 billion during 2026, roughly 35% of total group revenue. The following year, TD Cowen expects that figure to vault to $66 billion — about 58% of the top line — before potentially reaching $133 billion in 2028.

Those forecasts rest on a handful of outsized contracts. Anthropic ranks among SpaceX's customers, and a confidential prospectus filing outlines potential payments to SpaceX for computing capacity of up to $84.5 billion through 2029. Google, meanwhile, reportedly secured access to roughly 110,000 graphics processors over 32 months in a deal worth more than $30 billion.

The existing connectivity arm continues to expand in parallel. Starlink closed the second quarter of 2026 with 12 million subscribers, and connectivity revenue for that three-month stretch came to $4.29 billion.

UBS sees a stronger quarter, and a heavier bill

Separately, UBS reaffirmed its Buy rating and $210 target on Tuesday, forecasting third-quarter 2026 group revenue of $13.8 billion — about 7% above the average Wall Street estimate. The AI segment is expected to contribute the bulk of that at $7.6 billion, while the connectivity unit housing Starlink is projected to grow 59% to $4.9 billion.

The capital required to build all of this is staggering. UBS pencils in $19.3 billion of investment in the third quarter alone. TD Cowen forecasts $160 billion in AI-related capital spending for 2027 and expects free cash flow to remain negative through 2030, with debt issuance likely to climb meaningfully in the coming years.

Starship clears its first real cargo test

Underpinning the terrestrial expansion is progress in orbit. On Monday, Starship completed its 14th test flight and, for the first time, deployed 26 of the new V3 Starlink satellites into Earth orbit. All 26 were contacted as planned — the milestone that matters most for proving the vehicle's utility as a cargo carrier.

The flight was not clean. One upper-stage Raptor engine failed prematurely, cutting the mission short after roughly three hours with a hard splashdown in the Pacific instead of the six Earth orbits originally targeted. Spaceflight engineer Dean Sladen noted that investigators must now determine whether the fault was an isolated incident or a systemic engine problem. Reuters reported that delays could weigh on NASA's plans for future lunar landings.

The setback fits a familiar pattern for the company, which identifies weaknesses through real flight loads rather than design-board caution. Attention now turns to Flight 15, where a first attempt to catch the vehicle is viewed as the next key operational catalyst.

What the discount is pricing in

At 32% below its 52-week high, the stock carries a visible risk premium for regulatory hurdles and technical setbacks. TD Cowen's analysts flagged the recurring engine issues as something to monitor closely, even as they endorsed the broader thesis.

If SpaceX can stabilize engine reliability and bring its satellite and compute fleets online on schedule, the scale advantages of the industrial buildout look likely to win out. The opportunity, on that view, outweighs the execution risk — though the cash burn required to get there is anything but small.