SpaceX just gave Wall Street a big reason to believe in the AI boom as demand for its computing power is off the charts

CEO Elon Musk said SpaceX could have up to 20 gigawatts of data-center capacity by the end of 2027.

Shares of SpaceX are on track for big gains on Wednesday after the company's results and investor presentation put its artificial-intelligence momentum on full display.

SpaceX's (SPCX) third-quarter revenue grew 161% from a year before to $14.6 billion, and the star of the show was its super-intelligence division, which has grown nearly 830% over that span. For the first time in a quarter, SpaceX got more than half of its sales from this unit, which includes business functions like selling artificial-intelligence computing power.

Analysts at RBC Capital Markets, led by Ken Herbert, called the unit the "standout" in what was another positive quarter for SpaceX.

The earnings call was also packed full of optimistic signals for the broader AI landscape, sending shares of companies like Nvidia (NVDA) and Intel (INTC) rising in premarket trading on Wednesday. Shares of specialized cloud providers -which sold off heavily last week on concerns of rising interest rates - also climbed, with CoreWeave (CRWV) up 4.5% and Nebius (NBIS) up 5.5%.

SpaceX shares were up over 9%.

Tesla's stock (TSLA) meanwhile advanced almost 2% after CEO Elon Musk said it and SpaceX had formed special committees to discuss the possibility of a merger - a move that the world's wealthiest man said he would support.

Cantor raised its price target from $246 to $345, driven by management's "materially higher-than-expected revenue commentary" for the following year, solidified semiconductor supply-chain timelines and a better-than-anticipated cash-flow trajectory, analysts headed by Colin Canfield wrote in a note.

Musk laid out ambitious targets of scaling the company's data-center capacity to potentially 20 gigawatts by the end of 2027, or at least 13 gigawatts, up from just 1.7 gigawatts at the end of the third quarter. And while investors have recently been concerned about the sustainability of demand for compute, or AI processing power, SpaceX's earnings call showed that the company is not seeing any sort of slowdown.

Musk said that SpaceX is "hounded relentlessly by every hyperscaler and by dozens of smaller companies to rent more of our compute." The pricing for computing power is currently extremely favorable for SpaceX, allowing the company to generate a payback in less than a year, with the possibility of achieving a six-month payback next year, the company said.

A team at Morgan Stanley, led by Adam Jonas, said the firm wasn't completely incorporating Musk's comments into a valuation model.

"For 2027, we are being conservative relative to guidance at this time while still modeling a notable acceleration on the compute ramp given lack of clarity on securing power, steep execution risks, and financing overhang," a team at Morgan Stanley, led by Adam Jonas, said, adding they forecast AI compute of 8.3 gigawatts at 2027 year-end.

Outsized demand for both SpaceX's AI software and hardware rental offerings gave investors confidence that SpaceX will be able to handle its elevated spending plans. For the quarter that ends in December, SpaceX forecasts that it'll spend $35 billion to $40 billion on physical infrastructure, a significant jump from the $19.6 billion spent this quarter.

Investors were also pleased by the company's forecast for the coming quarters. SpaceX confirmed that it's on track to reach an annual recurring revenue run rate of $100 billion by December. That metric could be between $500 billion and $1 trillion by the end of 2027, thanks to strong adoption of Grok Bot, Musk said on the earnings call.

For the first quarter of 2027, the company is aiming for revenue between $33 billion and $37 billion, with CFO Bret Johnson saying that the company has clearer visibility in its pipeline of computing contracts over the next six months.

That early first-quarter outlook is vastly ahead of the $22 billion that analysts tracked by FactSet expected for the period.

-Christine Ji -Nora Redmond