Space missions and artificial intelligence are both key to humanity's future, but one looks like a better investment than the other right now. Blue Origin's rocket explosion should focus minds on the relative risks of the hottest market themes.

While thankfully everyone was safe after one of Blue Origin's New Glenn rockets blew up on Thursday night, it's a reminder of the inherent risks of the space sector. Some highflying stocks that were partially dependent on Jeff Bezos' launch company -- such as satellite-broadband hopeful AST SpaceMobile -- could face challenges to their plans.

More broadly, investors have been blindly piling into space stocks due to excitement about SpaceX's impending initial public offering. The Procure Space ETF is up 75% this year, outstripping the 51% gains for the iShares A.I. Innovation & Tech Active ETF. But while SpaceX has impressive technology, its mooted valuation of more than $1.5 trillion has more to do with Elon Musk's legions of fans than financial fundamentals. If SpaceX stock comes down to earth after its market debut, it will take the entire space sector with it.

SpaceX is an AI company too -- housing Musk's xAI lab and planning to put data centers in space. Could its IPO mark the top for AI as well?

There's reason to believe AI will be more resilient. Firstly, there are other big players coming onto the market with healthy-looking financials -- see Claude-developer Anthropic, which has just been valued at $965 billion in its latest funding round. It is growing revenue far quicker than SpaceX. Secondly, a much broader range of companies are already generating significant AI revenue and profits compared with space stocks, such as Dell, which has just reported blowout earnings on the back of server demand.

One exploding rocket won't put an end to extraterrestrial ambitions. But investors would be better off concentrating on how AI is already transforming things down here on Earth.

-- Adam Clark

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Blue Origin Rocket Explodes in Setback for Space Stocks

Space stocks have gone stratospheric over the past month, but the rally could grind to a halt on Friday. A Blue Origin rocket blew up, bursting into an enormous ball of flames in a major setback for Jeff Bezos' space company.

   -- One of Blue Origin's New Glenn rockets exploded on its launchpad in Cape 
      Canaveral, Fla. late Thursday, sending a ball of fire into the sky. 
      Spaceflight news and tracking site NSF posted footage of the incident on 
      X. 
 
   -- Amazon founder Bezos said in a post on X that all personnel were 
      accounted for and safe. "It's too early to know the root cause but we're 
      already working to find it," he added. "Very rough day, but we'll rebuild 
      whatever needs rebuilding and get back to flying. It's worth it." 
 
   -- The incident could be bad news for pure-play space stocks, which have 
      been surging due to investor excitement about the looming SpaceX initial 
      public offering. AST SpaceMobile and Rocket Lab are both up nearly 90% 
      over the past month as hype builds. 
 
   -- Rocket explosions happen, and uncertainty tends to be priced in. But the 
      setback late Thursday may give investors a good excuse to lock in some 
      profit, following the spell of heady gains for AST and Rocket Lab. 

What's Next: Still, the failed launch by a competitor could bode well for SpaceX. The IPO next month is expected to raise about $75 billion and give Elon Musk's rocket and AI company a valuation of about $2 trillion.

-- George Glover

Dell's Revenue Growth Accelerating Thanks to AI Demand

Revenue at Dell Technologies is growing at an accelerating pace as demand soars for the hardware that powers artificial intelligence. But its software division is also getting some attention in a $9.7 billion deal to provide the Defense Department with Microsoft 365 and advanced cloud subscriptions.

   -- In the first quarter, the PC and server maker reported adjusted earnings 
      of $4.86 a share and revenue of $43.8 billion, both beating expectations. 
      Dell makes servers and networking equipment that companies use to help 
      power their AI. Revenue for its AI-optimized servers was $16.1 billion, 
      up 757%. 
 
   -- COO Jeff Clarke said demand was stronger than anticipated across all 
      lines of businesses and geographies, and customers were moving to secure 
      supply across a broad range of IT needs. Dell is increasing AI server 
      revenue expectations for fiscal 2027 to $60 billion. 
 
   -- The Defense Department agreement is meant to streamline and consolidate 
      software acquisition across the department, the government said, as well 
      as the intelligence community and the Coast Guard. 
 
   -- The company expects second-quarter earnings to be $4.80 a share at the 
      midpoint of its outlook, well above Wall Street estimates. Revenue for 
      the quarter is expected to be between $44 billion and $45 billion, while 
      analysts estimated second-quarter revenue of $35.1 billion. 

What's Next: Dell expects fiscal 2027 revenue to be between $165 billion and $169 billion, which is above its prior forecast and above analyst expectations.

-- Angela Palumbo

Costco Sees a Mixed Quarter as Shoppers Pushed Gasoline Sales

Costco, the last major retailer to report results this earnings season, failed to deliver the blowout results some investors may have expected from the warehouse club retailer, especially after previous strong data. The mixed earnings came the same day new inflation data grew at the fastest pace in April since 2023.

   -- Costco reported fiscal third-quarter earnings of $4.93 a share and an 
      11.5% jump in revenue from a year ago, to $70.5 billion. Same-store sales 
      rose 6.6%, while membership revenue climbed 10.5% from a year ago. 
      Digitally-enabled comps climbed, potentially showing that consumers were 
      shopping more online. 
 
   -- Warehouse clubs have boosted their value bona fides during the inflation 
      era, and data from Placer.ai show that both overall visits and same-store 
      visits (which typically measure locations open at least a year) were up 
      every month from November through April at Costco, likely helped by 
      rising gasoline prices. 
 
   -- April's personal consumption expenditures index, and the core PCE, both 
      rose as economists expected, but other measures of economic health showed 
      signs of fraying. Personal incomes didn't grow in April, and consumer 
      spending increased at a slower rate than the month before. 
 
   -- While some of that could be the one-off effect of the ending of a $12 
      billion Agriculture program for farmers, the data reveal consumers dipped 
      more into their savings. The personal savings rate declined to 2.6% in 
      April, the lowest monthly reading for the savings rate since June 2022. 

What's Next: Costco executives said they sold a record amount of gasoline at their stores in the quarter ended in May. CEO Ron Vachris said many members used Costco's gas stations for the first time in the third quarter. Those visits, he added, would likely translate to greater demand at its stores overall.

-- Teresa Rivas and Megan Leonhardt

IBM's $10 Billion Plan to Build Ultimate Quantum Computer

After years asserting its dominance in quantum computing, International Business Machines is pouring more than $10 billion into research and manufacturing over the next five years. The stepped up investment makes it more confident it can deliver the first large-scale fault-tolerant quantum computer by 2029.

   -- The machine it is building, which it calls Starling, is expected to be a 
      large-scale computer that can run complex calculations reliably, 
      executing 100 million quantum operations using 200 logical qubits. The 
      disclosure comes after the Trump administration announced funding for 
      quantum computing. 
 
   -- IBM was among a handful of quantum developers set to receive funding 
      under the 2022 Chips and Science Act. The government isn't just funding 
      quantum, but adopting a hands-on approach, with plans to take equity 
      stakes in D-Wave, Rigetti, and Infleqtion as part of the $2 billion 
      investment package. 
 
   -- Infleqtion separately announced Thursday that it was significantly 
      scaling up its presence in the U.K. with the launch of a research and 
      manufacturing hub, which is slated to open later this year. 
 
   -- IBM and the Commerce Department will each contribute $1 billion to form 
      Anderon, a stand-alone quantum foundry. IBM has pledged to provide 
      "significant" intellectual property, assets, and a skilled workforce. 

What's Next: Jay Gambetta, who leads IBM's research division, said: "Now that we're accelerating, we want to have a very agile team designing new quantum processing units, new quantum computers, and deploying them. And we need the fab to get to a point where it's reliable."

-- Mackenzie Tatananni and Janet H. Cho

Figma Becomes Exhibit A Why Companies Avoid Going Public

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