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SUMMARY
Parkev Tatevosian, CFA, analyzes Elon Musk's announcement that SpaceX will build its AI services exclusively on Nvidia systems, highlighting the implications for Nvidia stock investors. The discussion covers SpaceX's aggressive AI infrastructure expansion, Nvidia's market positioning, valuation, and competitive landscape.
MAIN POINTS
- Elon Musk announces SpaceX will build its AI services exclusively on Nvidia systems during the company's first earnings call as a public company.
- SpaceX reports 1.44 gigawatts of computing capacity as of June 30, 2026, with plans to grow to 2 gigawatts by year-end and 10 gigawatts by the end of next year.
- SpaceX's rapid AI capital expenditures and high valuation are expected to benefit Nvidia through increased GPU demand.
- Nvidia's Vera Rubin architecture is described as best-in-class, and SpaceX aims to catch up with leading AI competitors by investing heavily in Nvidia technology.
- Despite a recent stock price increase, Nvidia is considered undervalued compared to peers and historical averages, with a forward P/E ratio of 17.2 and a calculated fair value of $300 per share.
- Industry competition and economic pressures have weighed on Nvidia's stock, but the SpaceX partnership is seen as a strong positive development.
DETAILED ANALYSIS
Elon Musk's announcement that SpaceX will exclusively use Nvidia systems for its AI services marks a significant endorsement for Nvidia's technology and future growth prospects. During SpaceX's inaugural earnings call as a public company, Musk highlighted the company's commitment to Nvidia's Vera Rubin architecture, describing it as the best AI computing platform available. SpaceX reported 1.44 gigawatts of computing capacity as of June 30, 2026, with plans to increase this to 2 gigawatts by the end of the year and to 10 gigawatts by the end of the following year, signaling an aggressive expansion in AI infrastructure.
This rapid scaling is supported by substantial capital expenditures, with $15.88 billion spent on AI in the most recent quarter and $23.5 billion over the first half of the year. The company's high valuation, even after a post-IPO decline, provides ample opportunity to raise additional capital through stock sales or borrowing, further fueling Nvidia's GPU demand.
Nvidia's position as the preferred provider of high-performance AI hardware is reinforced by Musk's remarks, especially as SpaceX seeks to catch up with leading AI competitors such as OpenAI's ChatGPT, Anthropic, and Google's Gemini. The announcement led to a strong market reaction, with Nvidia's stock rising over 4.5% to above $221 per share. Despite this increase, Nvidia is viewed as undervalued relative to its peers, trading at a forward price-to-earnings ratio of 17.2, which is lower than competitors like AMD and other AI-focused companies.
Discounted cash flow analysis suggests a fair value of $300 per share, indicating considerable upside potential.
However, concerns remain about intensifying competition from lower-priced alternatives offered by companies like Alphabet, Amazon, and AMD, as well as the impact of open-source models from China. These factors have contributed to Nvidia's stock underperforming other semiconductor companies in 2026. Nevertheless, the exclusive partnership with SpaceX is expected to drive significant demand for Nvidia's products, presenting a compelling opportunity for investors.
The analysis concludes with a reiteration of Nvidia as a top stock pick, supported by the latest developments.
LINKS
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