Why SpaceX stock is falling despite strong revenue growth

SpaceX's stock experienced a significant tumble, falling 8% to $115.27 per share, even as the company reported robust revenue growth in its first public quarterly earnings. Investors appear increasingly concerned about the rocket maker's aggressive and accelerating investments in artificial intelligence.

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The entire market is beginning to suspect that the extraordinary spend on AI might not work out for every firm. They cannot all be winners, yet they are all spending as if they will be.

In its second-quarter earnings report, SpaceX disclosed a substantial $15.8 billion in AI-related capital expenditures, a figure more than double that of the first quarter. This massive spending has led investors to question whether these investments can adequately justify the company's lofty $1.5 trillion valuation.

"The entire market is beginning to suspect that the extraordinary spend on AI might not work out for every firm," David Trainer, CEO of New Constructs, an investment research firm, told CBS News. "They cannot all be winners, yet they are all spending as if they will be."

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Elon Musk has a history of overpromising, so investors took some of the optimistic forecasts with a grain of salt.

Investors are looking beyond the strong quarterly results, which saw revenue reach $7.8 billion and losses narrow, to focus on the feasibility of SpaceX's ambitious agenda, including sending data centers into space. "Elon Musk has a history of overpromising, so investors took some of the optimistic forecasts with a grain of salt," noted Jay Ritter, an IPO expert and professor at the University of Florida. AI-related investments constituted 86% of the company's total capital expenditures from April to June.

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We're building AI compute capacity at scale faster than anyone else, we believe, and we're significantly improving our AI models, most notably with the release of Grok 4.5 last month.

Adding to the stock's volatility, up to 911.5 million shares could become eligible for sale on Thursday as a lockup period expires, potentially flooding the market. Short sellers, who have been betting against SpaceX, may also increase their positions, further pressuring the stock.

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The good news is that revenue and earnings for the quarter were above expectations, and that the company was optimistic about its ability to launch orbital data centers as early as next year. But the bad news is that the company is spending lots of cash on Earth-based data centers, a business that has a lot of competition.