Elon Musk and SpaceX Just Delivered Incredible News to Nvidia That Could Help the Stock Double in the Next Year

When Elon Musk and Space Exploration Technologies (NASDAQ: SPCX) announced the company's third-quarter earnings results on Oct. 20, there was incredible news for Nvidia (NASDAQ: NVDA) and its shareholders. On the Q3 earnings call, Musk said the space and artificial intelligence (AI) company plans to aggressively ramp up its AI infrastructure spending to deliver annual recurring revenue (ARR) between $500 billion and $1 trillion by the end of 2027.

Musk had already announced in August, during the company's first earnings conference call, that SpaceX would use Nvidia chips exclusively moving forward. At that time, he said Nvidia's Vera Rubin architecture was the best on the market and that SpaceX greatly valued its partnership with Nvidia. The two companies are also working together to develop chips that can withstand cosmic radiation and work in orbital data centers.

10 gigawatts of SpaceX 2027 compute power will translate to huge revenue for Nvidia

During that August conference call, Musk anticipated that SpaceX would end the year with 2 gigawatts of compute power. Meanwhile, he expected the company's end-of-2027 cumulative computing capacity to be closer to 10 gigawatts than 5 gigawatts. That was a strong indication that SpaceX could triple its AI spending in 2027.

However, Musk shocked investors during the company's recent Q3 conference call when he projected that SpaceX would have up to 3 gigawatts of computing capacity by the end of 2026 and is expecting to add an incremental 10 gigawatts of compute power in 2027. However, he said the goal was to add 20 additional gigawatts and that there was a "non-zero possibility" of this happening.

Musk and SpaceX standardizing on Nvidia's Vera Rubin architecture is huge news for the chipmaker. With Vera Rubin, Nvidia is getting an estimated $40 billion in revenue per gigawatt. This comes not just from its graphics processing units (GPUs) but also from its entire ecosystem, which includes its Arm-based central processing units (CPUs) and networking components.

On top of that, with Vera Rubin, Nvidia has added language processing units (LPUs) that it acquired as part of its "acquisition" of Groq, which are designed to handle the memory-intensive decode phase of inference. It's also expanded its software layer, which now includes its Nemotron open-weight models. As a result, semiconductor research outlet SemiAnalysis estimates that Nvidia is getting 39% more revenue and 42% more profit per gigawatt with Vera Rubin NVL72 configurations than with its older Grace Blackwell setup.

Image source: Nvidia.

$400 billion to $800 billion in revenue from SpaceX in 2027

For Nvidia, SpaceX's projected 10 gigawatts of additional computing power would equate to around $400 billion in revenue. If SpaceX were somehow able to add 20 gigawatts, which is still a long shot given it is dealing with power cooling and electrical equipment infrastructure constraints, that would be an additional $800 billion in revenue next year.

Nvidia is currently projected to generate just under $412 billion in revenue this fiscal year, ending in January 2027. It has projected that its revenue will grow by 70% in fiscal 2028, and the current analyst consensus is for revenue of around $692 billion. Based on SpaceX's new estimate of AI infrastructure spending, it will add at least 4 more gigawatts of compute capacity in 2027 than previously projected. Assuming Nvidia can sell more Vera Rubin systems to SpaceX without having to pull capacity from other customers, its fiscal 2028 revenue would be closer to $850 billion.

Based on my model below and that revenue number, Nvidia would produce around $20.72 in adjusted earnings per share (EPS) in fiscal 2028, well above the current $15.91 consensus. Assuming another 50% revenue growth in fiscal 2029, its adjusted EPS would be $30.59.

Below are my projections:

Calculations by author.

Even if Nvidia stock were to just maintain its current forward P/E of 13.5 times, it would be valued at around $415, nearly double its current price. However, an argument could certainly be made that the semiconductor stock should trade at a market multiple of 19, which would value the stock at around $580. This also only assumes that SpaceX doesn't come close to hitting its more ambitious computing capacity target.

Any way you slice it, SpaceX's spending plans are great news for Nvidia and are a great reason to buy the semiconductor stock.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arm Holdings and Nvidia. The Motley Fool has a disclosure policy.