Love Musk or Hate Him, Here’s How I’m Building My SpaceX Position
Anthropic just filed a key financial doc, SpaeX reported earnings, and some investors are betting against Elon. Here’s what all that means for my position.
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We have mild market action on Monday morning as investors prepare for one of the busiest news weeks of the year. The indexes are green with breadth running close to even. The Magnificent Seven tech stocks are leading while small caps are lagging.
The S-1 filing for Anthropic hit this morning. The stock will likely start trading in November on the Nasdaq under the symbol ANT. There is a lot of information in the filing to study, but so far there isn’t any major reaction.
Later this week we have Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL) reporting along with hundreds of other stocks. We also have the Federal Reserve interest rate decision to look forward to.
We are likely to see plenty of volatility, which should produce some opportunities. One name that is going to move around on the AI news is SpaceX (SPCX), and I’ll be looking for a chance to build my core position as well as to trade it.
SPCX launches rockets, sells satellite internet through Starlink, and since buying xAI earlier this year rents out computing power to other companies and runs the Grok chatbot. It came public in June at $135, traded down near $105 over the summer, and has spent the fall climbing back.
Strong Third Quarter
The September quarter, reported last Tuesday evening, beat in every segment. Revenue more than doubled from a year ago to $14.6 billion, beating expectations near $12.8 billion, and the company earned money where it had lost it a year earlier.
The company’s computing business, which it calls Super Intelligence, posted an operating profit after losing more than $1 billion in the June quarter. Starlink doubled its operating profit and now has about 13.6 million subscribers paying a bit more per month than they did a year ago. Guidance for the first quarter of next year is $33 billion to $37 billion of revenue, more than twice what it just reported, and the company has $63 billion of contracted business on the books with two-thirds of it due inside a year.
That growth requires some substantial spending, which makes investors a little nervous. SpaceX spent about $48 billion on equipment in the first nine months of the year against about $13 billion of cash from operations, and it plans to roughly double the quarterly outlay in the current quarter. That is the number the bears are highlighting.
Over the weekend, the company addressed this concern. Elon Musk said SpaceX closed $40 billion of debt financing for chips arriving in the first half of next year, and that it got the money because it is investment grade and has rocket and satellite revenue that does not depend on AI. In the same post he said the debt markets have shut the door on anyone without that kind of revenue and predicted most of the smaller AI data center renters will not survive. Whatever you think of him, that is the competitive advantage in one paragraph. The company can borrow when its competitors cannot.
This morning’s filing showed who is on the other side of that borrowing. Anthropic, the company behind the Claude models, disclosed that it has agreed to spend up to $120.5 billion with SpaceX’s computing arm on contracts running into 2029. That figure was about $45 billion when SpaceX filed to go public in May and $84.5 billion when Anthropic’s draft filing leaked a month ago.
The biggest AI customers are not shopping around for computing power. They are signing larger checks with the same supplier, and SpaceX is the one that can finance the chips to fill them. The caveat is that most of these contracts can be cancelled on 90 days’ notice, so the number is a ceiling on what Anthropic may spend rather than money in the bank. A customer does not keep raising a commitment that can be canceled unless it is using what it has.
Why the Stock Gave It Back
The stock jumped about 8% Wednesday morning and was back below where it started by Thursday’s close. Nothing in its own report caused that. Meta Platforms (META) beat and fell. Tesla (TSLA) beat and fell harder after cutting its spending plans. Lam Research (LRCX) gave a weak outlook and the chip stocks went with it. By Thursday morning hedge funds were cutting AI exposure across the board, and SpaceX went out with the group. The report said one thing and the stock did the opposite because of what other companies said. That gap is where I see opportunity.
Analysts chased the strong earnings report. Nine firms raised targets after the quarter and Bernstein added another this morning. JPMorgan went to $500 from $240, Cantor Fitzgerald to $345 from $246, Barclays to $300 from $254. The low end of the Street is Susquehanna at $176, and that is a neutral rating. More than thirty firms have published targets and the middle of the pack sits between $240 and $280 with the stock under $150. I don’t trade on price targets, but it is useful to know that the Street and the market are looking at the same report and reaching opposite conclusions.
The Musk Discount
Many investors dislike the CEO and will not own the stock because of him, and some are betting against it. That is part of this name. A stock that a lot of people are rooting against has a built-in bid when the news is good, because the people short it have to buy to cover. Sentiment is a position, and the positioning here leans the wrong way for the bears every time the company delivers. It also means the stock gets sold harder than it should when the mood on AI turns, which is the kind of dip I want.
The full 180-day lockup from the IPO expires Dec. 8, which frees insiders and early investors to sell. The earlier unlocks were absorbed well because many institutions had held back at the IPO, planning to buy on the large unlocks, and that supply was what they were waiting for.
The Chart and the Plan
Short-term support sits around $144, which is where the stock bottomed Thursday before bouncing Friday, and the bigger level is the $140 area that has held since September. Microsoft and Alphabet report Wednesday after the close and Amazon reports Thursday, with the Fed decision in between. If those reports bring another round of selling in the AI group, a dip toward $144 and then $140 is where I would add.
A close under $140 on heavy volume would tell me the group selling has become something more, and I would stop adding until it stabilizes. This is a stock I expect to own for a long time. This week I’m looking to use other companies’ earnings reports to buy it cheaper.
At the time of publication, DePorre was long SPCX, AMZN.
