SpaceX Negotiates Multi-Billion Dollar Computing Power Deal With Pentagon: Stock Price Drop Does Not Change Wall Street’s Bullish Expectations

TradingKey - According to The Wall Street Journal, SpaceX ( SPCX) is in talks with the U.S. Department of Defense to sell computing power. The deal could be valued at billions of dollars and, if finalized, would become the latest major infrastructure deal for Elon Musk's rocket, satellite, and artificial intelligence conglomerate.

The report noted that the partnership model for this deal is similar to previous agreements SpaceX reached with Alphabet's Google ( GOOGL) and AI company Anthropic. The negotiations come as the U.S. military seeks to build data centers on its military bases to enhance its computing autonomy.

Stock Price Volatility Doesn’t Change Wall Street’s Bullish Expectations

SpaceX shares once surged after completing its historic initial public offering (IPO) last month, but have recently fallen below the IPO price. As of Friday's U.S. stock market close, SpaceX shares fell 5.43% to close at $123.99.

[Source: TradingView]

Despite short-term pressure on the stock price, Wall Street analysts overall remain bullish. Some of the optimism stems from Elon Musk's ongoing implementation of infrastructure partnerships, driving the AI computing power segment from internal use toward external commercialization, which continues to unlock incremental growth potential.

As of July 17, 29 analysts have rated SpaceX, with the highest target price at $800, representing approximately 545% upside from the current price; the lowest target price is $115, implying a downside of about 7%, with an average target price of $243.81.

SpaceX Has Large Orders Laying Foundation for Compute Revenue

SpaceX has already secured several major contracts in the commercialization of computing power. In June this year, Google agreed to pay SpaceX $920 million per month to purchase computing capacity, a cloud services agreement that will run through mid-2029. In the same month, Anthropic also reached an agreement to pay SpaceX $1.25 billion per month to acquire computing power to support the operations of its Claude artificial intelligence software.

From these two contracts alone, SpaceX's monthly computing power revenue exceeds $2.17 billion.

Currently, SpaceX's computing power business relies on the data center footprint of its subsidiary, xAI. Although it lags behind competitors including OpenAI and Anthropic in programming capabilities, its strategic bet is placed on data center infrastructure construction. xAI has already built a data center in Memphis, Tennessee, and is currently expanding this footprint to Mississippi.