Commentary: SpaceX’s capital needs are out of this world

Commentary

SpaceX's rising capital needs might be a tough sell ahead of its blockbuster initial public offering, says Chris Bryant for Bloomberg Opinion.

05 Jun 2026 05:59AM

(Updated: 05 Jun 2026 06:15AM)

BERLIN: Elon Musk’s SpaceX needed comparatively little money to build a world-beating space launch and satellite-broadband firm. But as it reframes itself partly as an artificial-intelligence (AI) infrastructure company - offering both terrestrial and potentially space-based computing capacity - its financial needs are massively increasing.

This doesn’t bode well for a mooted US$1.8 trillion valuation in its initial public offering.

Before its AI pivot, SpaceX raised more than US$9 billion of venture capital to fund its Falcon rockets and Starlink satellite constellation, according to data shared with me by PitchBook. That’s a lot for a private start-up, even one founded almost a quarter century ago. But it’s a sliver of the sums that AI specialists OpenAI and Anthropic have tapped investors for recently.

HUNGER FOR FUNDS

The old SpaceX was able to use its capital so efficiently because of its reusable rocket innovations, cheaper in-house components, lucrative government contracts and profitable broadband internet services.

But the company’s hunger for funds has deepened since its February merger with another Musk outfit, the loss-making start-up xAI. The development costs for Starship, SpaceX’s heavy-lift launch vehicle, are only adding to the pressure.

While SpaceX held almost US$24 billion of cash and short-term marketable securities at the end of March, on current form even tens of billions of dollars of IPO proceeds wouldn’t last long.

As a standalone company SpaceX was “in many respects a magnificent business”, PitchBook senior research analyst Franco Granda tells me. “But after incorporating xAI it’s not the same company anymore. The pace of spending is concerning.” Founded in 2023, xAI has already raised more than US$40 billion to try to compete with OpenAI and Anthropic.

xAI’s Grok chatbot is struggling to keep up with Sam Altman and Dario Amodei’s creations. SpaceX has had more luck renting out spare data-center capacity. Anthropic has agreed to pay it US$1.25 billion a month for computing power.

This means SpaceX has become both an AI laboratory and a cloud provider like CoreWeave, with the added twist that it may one day operate data centers in space. While Musk’s engineers have often proved doubters wrong, it’s unclear how orbital data centres would be repaired or upgraded.

These ambitions will be astonishingly expensive and Musk isn’t stopping there: SpaceX also wants to build its own chipmaking plant, reducing its reliance on industry leaders Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. While another of his companies, Tesla, will help fund that extraordinarily complex endeavour, it may end up costing more than US$100 billion. And SpaceX is already burning through prodigious amounts of cash, while its debts have swelled to about US$29 billion.

On a consolidated basis, the company’s capital spending totalled more than US$20 billion in 2025, with most of that coming from the AI division. That’s more than the entire business’s US$18.7 billion of revenue that year.

During the first quarter of 2026, capex increased to more than US$10 billion, double the group’s revenue in the same period.

The IPO prospectus warns that capex will increase “substantially” in future, which SpaceX will fund using a “range of debt and equity financing solutions” available to it as a public company. It aims to maintain an investment-grade credit rating.

If all goes well, this splurge will open up enormous new revenue opportunities, lower the firm’s hardware costs and establish durable technological and financial moats to keep out new competitors.

The race with OpenAI and Anthropic for a public-market listing is partly about hoovering up what could be a limited supply of investor capital. In theory, the one who raises most money will be able to access the most computing power, develop the best AI model and win the race for superintelligence.

Tapping its heritage as a business that’s good at making stuff at scale, SpaceX has also succeeded in building AI training clusters - the infrastructure that’s needed to teach and run advanced models - very rapidly. On a per megawatt basis its approach appears cheaper than data-center rivals. This should let it recoup its spending faster.

A TOUGH SELL?

Nevertheless, its rising capital intensity might be a tough sell ahead of the IPO. Three cash-guzzling companies going public at the same time - SpaceX, OpenAI and Anthropic - is a lot for investors to swallow.

Even the older tech giants are struggling. Investors fret that “hyperscalers” such as Microsoft and Meta Platforms will suffer from rising depreciation costs and there are doubts about returns on their vast data-center investments. Shares in these companies are mostly doing much worse than those of semiconductor firms, the chief beneficiaries of their wild spending.

Yes, SpaceX also controls vital bottlenecks in the same way that a TSMC has a hold on chip supplies. Its rockets carry more than 80 per cent of everything that Earth sends into orbit, a lead that looks even more commanding following last week’s disastrous launchpad explosion for Jeff Bezos’s Blue Origin. But SpaceX’s financial results are far inferior to the chip firms’, who have huge pricing power and correspondingly fat profit margins.

Until Musk’s company can design and manufacture its own processors, it must keep buying them from third parties. And although its deal with Anthropic provides a quick buck, the payoff from many of its other investments could be far out in the future.

“We plan to allocate substantial capital to build our AI compute infrastructure, and we expect a multi-year investment horizon before these deployments translate into sustained positive AI Segment Adjusted EBITDA,” the prospectus noted.

It’s worth remembering that measure of earnings excludes the cost of writing off tangible investments over their useful lives. Don’t forget: Computer chips and satellites don’t last all that long.

Anyone buying SpaceX shares at a US$1.8 trillion valuation - more than 90 times last year’s revenue - is betting that traditional metrics like cash flow and profit don’t apply here. That’s often been the case for Tesla, where a golden dawn is always just over the horizon. SpaceX’s massive capital needs will put such sunlit assumptions to the test.

Source: Bloomberg/zw(sk)