Elon Musk Just Gave Fantastic News for Nvidia Investors
Key Points
SpaceX's SI business is demonstrating massive growth, and the company is building out to meet demand.
It's planning to use 440,000 Rubin chips in its Colossus II data center cluster.
Wall Street expects Nvidia sales to reach $692 billion next year, but Nvidia is aiming higher.
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Space Exploration Technologies (NASDAQ: SPCX) just reported fabulous earnings, with a 161% increase in revenue and a $4.4 billion net income, its first quarterly profit.
Elon Musk shared exciting news about where the company's headed, including perfecting reusable spaceships and increasing satellite bandwidth by 100x. But he also gave fabulous news for Nvidia (NASDAQ: NVDA) investors.
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Running on Rubins
The standout in the report was the artificial intelligence (AI) business, now called SI, or Super Intelligence. Sales rose an astonishing 835% year over year, driven by compute deals, the acquisition of coding company Cursor, and enterprise adoption of the Grok AI model. It also became profitable, with $431 million in operating income.
Image source: Nvidia.
Musk boasted that he took the same team that made SpaceX's rocket business so dominant and tasked them with deploying AI compute infrastructure, likening it to "the New York Yankees playing in Little League" and calling it "not fair" to the competition.
The company rents out compute power from its massive Colossus I data center cluster, and it has agreements with Alphabet and Anthropic for $920 million and $1.2 billion in monthly revenue, respectively. It's now in the process of building Colossus II, and Musk said that it will predominantly feature Nvidia's Vera Rubin chip infrastructure.
He also said that SI plans "to have the most powerful training cluster online" by the second quarter, and to that end, it will need "440,000 Vera Rubin computers deployed for optimal training." Grok is growing quickly, with accelerating usage, and SpaceX is scaling it for enterprises. Musk sees them using Grok Bot, its AI agent, in roles as if it were a human agent. "I've never seen anything grow this fast," he said, and he anticipates Grok Bot being the main user of the extra compute.
The race to $1 trillion
Musk thinks that SpaceX could have $500 billion to $1 trillion in Annual Recurring Revenue (ARR) by the end of 2027. If so, that would make it one of the biggest companies in the world by sales.
Nvidia CEO Jensen Huang gave a forecast of $1 trillion in sales through 2027 from the Blackwell and Rubin lines alone, and CFO Collette Kress said the company expects sales to increase 70% next year, although that's in a supply-constrained climate. Wall Street expects Nvidia sales to reach $692 billion next year, and that's with a 68% increase.
I would also note that Musk specifically said he's going to use Vera Rubin computers, not just Rubin chips. That's a full-stack computer system that brings in more revenue than chips alone.
That's great news for Nvidia and its shareholders, and it implies that there's still major upside for Nvidia stock over the next few years.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.
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