Morgan Stanley Managing Director Adam Jonas said Wednesday that Space Exploration Technologies Corp. (SpaceX) will need to raise approximately $700 billion in debt to achieve its $22.7 trillion Total Addressable Market ambitions for enterprise AI. During a CNBC interview, Jonas stated that SpaceX has high ambitions requiring significant investment, adding that the company won't be able to raise funding of that scale unless its business is performing well. Jonas highlighted that SpaceX could face geopolitical risks as well as threats from adversaries in space, noting that space is a warfighting domain where adversaries could disrupt valuable orbital assets. SpaceX stocks were up 0.5% during Wednesday morning's trade.
Jonas Outlines SpaceX Funding Requirements and Geopolitical Risks
Jonas told CNBC that SpaceX won't be able to raise the required capital unless the business performs well. "For folks that are used to Tesla, it's going to be one hell of a ride. It's up to investors to decide if the juice is worth the squeeze," he said.
The analyst emphasized geopolitical threats facing the company. "Space is a warfighting domain. You have adversaries that could dazzle the orbit and disrupt those very valuable assets in space," Jonas added. He also noted that while SpaceX's recent cloud computing deals are placeholders, the company could face growing competition in the future, stating: "If you like risks, this is the stock for you."
SpaceX Business Model Centers on Launch Cost Advantage and Starlink Revenue
Jonas described SpaceX's modeling as very simple, noting that the company's business prior to recent neocloud deals was based on two segments: satellite launches and the Starlink satellite internet service.
"It starts with the space business, where their cost is $1,000 a kilo. It's about 20 times cheaper than the industry average, and with the new architecture of the Starship, the goal is to get it down to $100," Jonas said.
The analyst added that Starlink is SpaceX's cash-flow machine, while noting that CEO Elon Musk's AI ambitions go beyond simply offering compute capacity to frontier AI companies.
Morgan Stanley Sets $300 Price Target with Overweight Rating
According to TheFly, Morgan Stanley has a $300 price target on SpaceX with an 'Overweight' rating, implying an upside potential of 100% from current levels.
Retail sentiment on Stocktwits around SpaceX trended in 'bearish' territory at the time of writing. SpaceX stock is flat year-to-date. The Invesco QQQ Trust (QQQ) is up 28% over the past 12 months, while the iShares A.I. Innovation and Tech Active ETF (BAI) is up 58%.
FAQ
How much debt does Morgan Stanley say SpaceX needs to raise for its enterprise AI ambitions?
Morgan Stanley Managing Director Adam Jonas said Wednesday that SpaceX will need to raise approximately $700 billion in debt to achieve its $22.7 trillion Total Addressable Market ambitions for enterprise AI.
What risks did Adam Jonas highlight for SpaceX stocks?
Jonas highlighted geopolitical risks and threats from adversaries in space, stating that space is a warfighting domain where adversaries could disrupt valuable orbital assets. He also noted potential growing competition in cloud computing.
What is Morgan Stanley's price target for SpaceX stocks?
According to TheFly, Morgan Stanley has a $300 price target on SpaceX with an 'Overweight' rating, implying an upside potential of 100% from current levels.
