Last month, Elon Musk took to X to tell the short-sellers betting against his rocket company, Space Exploration Technologies (NASDAQ: SPCX), that their "survival probability" is "very low." And after its first quarterly report was released last week, a whole lot of investors think he's right. The company gave bulls plenty to like, with revenue up 92% year over year (YoY), the doubling of Starlink subscriptions, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) nearly tripling. This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » But dig a little deeper into the numbers, and I think there are plenty of reasons to think the short-sellers -- who profit when share prices fall -- are right.
SpaceX generated $3.5 billion in operating cash flow through the first six months of 2026 -- impressive, until you see that the company made $28.5 billion in capital expenditures (capex). Free cash flow (FCF) was roughly negative $25 billion in just six months. And that actually understates the economic investment somewhat, because another roughly $3.9 billion of capital expenditures were financed rather than paid in cash.
Now, to be fair, this is a company in the middle of an enormous build-out, and heavy spending today can mean big payoffs down the road -- in theory. Spending at this pace and on this scale puts a whole lot of pressure on those investments to pay off quickly, and, at least for the spending on AI, there's a real question of whether they will pay off at all. One unnamed customer accounted for 19.5% of SpaceX's entire Q2 revenue and the lion's share of its AI revenue.
That could be a serious problem if the customer backs out, especially given that AI is where SpaceX is spending lavishly -- $23.6 billion of its total capex went into AI alone. Although the customer is unnamed, it is very likely that it's Anthropic, the maker of Claude. The deal to lease computing capacity from SpaceX's xAI is cancellable by either side with just 90 days' notice after an initial ramping period.
That is not the kind of agreement you want when you're committing billions to service it. We've already seen how loose these arrangements can be. Musk himself previously clarified that one heavily touted lease was initially just for 180 days, despite the potential for a much longer relationship.
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