William Blair Initiates SpaceX at Outperform

William Blair analyst Louis DiPalma initiates coverage on SpaceX (NASDAQ: SPCX) with a Outperform rating.

“We had a front-row seat at Starbase when SpaceX founder Elon Musk divulged to the packed crowd of aerospace and defense, internet, software, and telecom analysts from across Wall Street that 1) Anthropic was interested in acquiring xAI data center capacity and 2) SpaceX struck a deal to acquire Cursor for $60 billion.

To us, these nascent AI milestones were not that surprising, as we also were in the proverbial front row to SpaceX’s groundbreaking disruption of the space and satellite communications industries for the past decade through our coverage of ViaSat, Iridium (SpaceX’s former largest customer), Gogo, Boeing, and AST SpaceMobile.

In our view, SpaceX means business when it comes to AI infrastructure, and xAI is already showing signs that it will be able to join AWS, Google, and Microsoft as a leading infrastructure-as-a-service hyperscaler.

There is major overlap between building AI satellites and building satcom satellites (solar, onboard processing, lasers, battery, launch).

After already disrupting satellite communications, SpaceX’s Starlink, with fiber-like speeds from its network of 10,000 low-Earth-orbit satellites, is rapidly taking market share from global telecom operators (i.e., AT&T, Comcast, Deutsche Telekom, NTT Docomo, America Movil).

This trend should further accelerate with the new V3 satellites, which generate 10 times the amount of capacity.

In addition, growth will be stimulated by greater customer awareness from Starlink’s rollout across 41 airlines.

We expect Starlink to bundle fixed-line broadband and wireless services, similar to Comcast, but on a global scale, as well as to strike mobile virtual network operator (MVNO) agreements and become its own global wireless telco in the $750 billion global wireless market.

Dominant launch capabilities are a decade ahead of peers.

Starship is nearing closer to the monumental milestone of full rocket reusability that will be a key enabler for the connectivity and AI businesses to soar to new heights.

We see share upside of greater than 20% over the next year based on our sum-of-the-parts analysis.

Musk has established himself as one of this generation’s greatest innovators, and SpaceX has carried the torch for the U.S. industrial base during a time when peers have struggled.

While SpaceX may miss certain operational and financial targets, we expect investors to collectively value its telecom, launch, computer-as-a-service, AI models, and other items at over $2.7 trillion.

The main risks include the potential for valuation multiple compression and execution for the wireless and orbital data center businesses.”

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