SpaceX shares slide on the heels of first quarterly report

SpaceX's stock price experienced a significant decline, falling more than 13 percent following the release of its inaugural quarterly earnings report as a publicly traded entity. The shares closed at $108.10 on Wednesday, marking a substantial drop from Tuesday's closing price of $125.33.

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We’ve watched the same scrutiny land on Big Tech this earnings season, where investors have questioned open-ended wallets and started demanding a visible return on them.

Investors appeared spooked by the company's substantial increase in capital expenditure, which surged to $18.37 billion. This figure represents a six-fold increase from the previous year and significantly exceeded the $13.2 billion forecast by analysts. A major portion of this investment, $15.8 billion, is allocated to artificial intelligence (AI) infrastructure, including specialized compute, storage, networking, and software systems necessary for large-scale AI model development and operation. SpaceX aims to boost its data center capacity from 1.4GW to 2GW by year-end.

This heavy investment in AI infrastructure has raised questions among technology sector investors about the potential for future returns. Analysts note that similar scrutiny is being applied to Big Tech companies this earnings season, with investors demanding visible returns on significant spending. SpaceX faces an additional challenge, as it requires shareholders to finance data centers in orbit.

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SpaceX faces that test with an added degree of difficulty because it’s asking shareholders to bankroll data centres in orbit.

Despite these concerns, SpaceX reported positive performance in its "connectivity" business. Revenue from its Starlink satellite communications service jumped 66 percent year-over-year, driven by a doubling of subscribers to 12 million, generating $1.66 billion in operating income. However, the stock's volatility is expected to continue as the first post-IPO lock-up expiration approaches, potentially making up to 911.5 million shares eligible for sale.

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The stock is likely to be volatile once the lock-up lifts.