SpaceX shares tumbled sharply after its first public earnings report revealed a surge in spending on artificial intelligence (AI), overshadowing robust revenue growth and fuelling investor concerns about profitability.

Shares of the company fell about 9% on Wednesday after executives reported quarterly spending had jumped to $18.3 billion, more than six times higher than a year earlier. Most of the growth was linked to investments in A.I. infrastructure, the executives said.

SpaceX’s revenue for the quarter that ended in June was $7.8 billion, almost double the number a year ago. The company reported a net loss of $143 million for the quarter and $2 billion for the first half of the year despite higher sales.

SpaceX, which developed the launch vehicle, operates the Starlink satellite internet network and owns social media platform X, started trading on US stock markets in June.

Chief Executive Elon Musk told investors during the earnings call that he believed the market undervalued the company.

Starlink continued to be the company’s best financial performer, racking up $1.6 billion in profits in the second quarter, Musk said. He said the satellite Internet business would continue to grow rapidly.

Starlink could eventually be one of the dominant internet providers in the world, Musk said, without providing a timeline or supporting projections.

The company is also growing its AI infrastructure business, supplying computing power to corporate customers, including Google and Anthropic. Musk said SpaceX now has 1.4 gigawatts of AI computing capacity, which will grow to at least 10 gigawatts sometime next year as new data centres come online.

“Data centres are a trivial problem compared to making reusable rockets,” Musk said during the investor call.

Rocket launches remain SpaceX’s core business, but its space division lost $542 million on $962 million in revenue in the quarter.

That was a loss-making business too, with revenues of $2.5 billion and losses of $1.2 billion.

Capital expenditures are expected to be at similar levels for the remainder of the year, Chief Financial Officer Bret Johnson said.

Musk projected SpaceX could reach $1 trillion in annual revenue by 2030, a target he said he had anticipated hitting a year later, despite current losses.

Analysts differ on strategy

Market watchers said the size of SpaceX’s AI investment is changing how investors see the company.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said the company could increasingly become an AI infrastructure provider, while still having a major space business.

Starship and future iterations of Starlink are central to the company’s long-term goals, but AI could be the company’s biggest moneymaker in several years, he said.

“Starlink’s subscriber growth looks strong, but it’s the company’s only consistently profitable operating segment,” said Brady Wang of Counterpoint Research.

“The heavy losses in the AI business make it difficult to say the overall company is undervalued currently,” said Fabien Yip of IG.

Wendy Souvannarath, chief executive of Carré Partners, an investment firm with a stake in SpaceX, said the company's AI spend is part of a wider trend in the tech sector.

Management expects those investments to pay off relatively quickly, she said, and she was optimistic about the company's long-term strategy.

Yip said the political profile of Musk remains a potential risk to investor sentiment.

Shares in SpaceX have fallen back from their first-day highs since their debut in June. The stock traded below its initial listing price of $135 for several weeks after briefly reaching an intraday high of $176 shortly after listing.