SpaceX left behind as US stocks rally

A fresh record by the S&P 500 index today contrasted with more pressure on Space Exploration Technologies Corp Class A (NASDAQ:SPCX) after its big earnings beat in last night’s maiden results failed to re-ignite the newly listed shares.

SpaceX opened at near to $110, having given up all the gains of the previous session to trade at half the record $225 seen in the days after June’s $135 or £1.8 trillion stock market debut.

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Today’s slide came even though Elon Musk’s satellites, rockets and AI company recorded a better-than-expected second quarter revenue figure of $7.8 billion (£5.6 billion) and beat Wall Street earnings expectations by a margin of 75% with a surplus of $3.5 billion.

The setback for shares followed a big jump in capital expenditure in the quarter to £18.4 billion, as well as expectations for a similar level of spending over the remainder of the year.

SpaceX faces another big test tomorrow when early investors have the opportunity to sell a portion of their holdings outside the standard 180-day lockup period.

Morgan Stanley, which has an unchanged price target of $300, said that the release of shares provided an opportunity to gain exposure to a “potential generational compounder that converts energy into a networked/swarming intelligence at scale”.

The strength of AI compute revenues prompted the bank to lift its 2026 and 2027 topline forecasts to $48 billion and $102 billion respectively, while it now sees margins expanding to 15.9% and then 33.2%. AI accounts for the bulk of its $163 billion capex forecast for 2027.

When the bank launched its SpaceX coverage last month, it highlighted a combination of near-monopoly launch economics, the world’s largest LEO (Low Earth Orbit) satellite network through Starlink and a fast-scaling AI infrastructure business.

It said: “We see the company as one of the few platforms that can link real estate in orbit, global connectivity, and compute capacity into one infrastructure stack.”

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The pressure on Nasdaq-listed SpaceX shares came on the day of more progress by US markets, including the S&P 500 index after last night’s rise of 1.8% to a record high close of 7,737.

Confidence has been boosted by Monday evening’s Palantir Technologies Inc Ordinary Shares - Class A (NASDAQ:PLTR) results, which included a forecast-beating second quarter earnings figure and upgraded full-year guidance.

Caterpillar Inc (NYSE:CAT) also lifted its revenue growth outlook after demand for its power-generation and construction equipment was boosted by a big number of data centre projects.

The S&P 500 is now up by 6% in the past week as the earnings season nears its conclusion.

Bank of America said the beat rate for earnings per share is at its highest level since 2021, with 77% of companies exceeding consensus expectations. That's well above the 66% average for the same point of the earnings season.

Based on results from more than 300 companies, the bank said second-quarter S&P 500 earnings per share (EPS) growth is tracking 27% year-on-year and a four percentage point beat versus the consensus at the start of the earnings season.

UBS Global Wealth Management today highlighted the increasingly broad-based nature of earnings growth as among reasons why the drivers of the equity market rally remain in place.

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It also referred to easing geopolitical tensions as well as factors including a resilient US economy and its belief that the Federal Reserve has room to remain patient on interest rate rises.

The bank added that corporate earnings continue to validate the investment case for AI, even if investors are becoming more selective about where value is being created.

UBS said: “Palantir’s results follow last week’s earnings reports from hyperscalers, which helped restore investor confidence in the AI trade after a volatile July exposed a widening divide between companies generating returns on AI investment and those facing mounting cash-flow pressures.”