SpaceX commits exclusively to Nvidia, Wall Street says stock is undervalued

SpaceX's second-quarter results delivered validation for Nvidia investors. The company reported 247% revenue growth in its AI segment, driven primarily by cloud services deals with Alphabet and Anthropic and supplemented by enterprise AI tools. More significantly, CEO Elon Musk committed SpaceX to an exclusive partnership with Nvidia, stating on the earnings call: "We've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture. We think it's the best AI computer."

Vera Rubin is Nvidia's next-generation superchip architecture, pairing Vera CPUs and Rubin GPUs with chip-to-chip interconnects called NVLink. The module delivers about 10 times more performance per watt compared to its predecessor Grace Blackwell, making it substantially more efficient. Musk outlined an aggressive expansion timeline, telling analysts: "We expect to end this year with over 2 gigawatts of compute. And probably our cumulative compute online by the end of next year will be several times higher. It may, let's say, be closer to 10 gigawatts of compute than 5 gigawatts of compute." He added, "We're building AI compute capacity at scale faster than anyone else."

SpaceX's capital intensity signals its emergence as a major new player in infrastructure. The company reported $13 billion in AI-related capex in 2025 but has already exceeded that figure in the first half of 2026. Morgan Stanley estimates SpaceX's AI infrastructure investments will reach $110 billion in 2028, representing annual growth of about 100%. If accurate, SpaceX would join the top five hyperscalers—Alphabet, Amazon, Meta, Microsoft, and Oracle—as a sixth major investor in AI data center buildout. Goldman Sachs forecasts the top five alone will invest about $800 billion in AI infrastructure in 2026, with total AI-related capex topping $1 trillion.

Wall Street's valuation of Nvidia reflects cautious optimism anchored in earnings growth and a historical pattern of underestimation. Analysts forecast Nvidia's earnings will grow at 45% annually over the next three years. That growth rate, paired with the stock's current valuation of 33 times earnings, yields a price-to-earnings-to-growth ratio of 0.75—a level considered undervalued and the lowest the stock has achieved in five years. Among 65 analysts covering the name, the median target price is $300 per share, implying 33% upside from the current $225. The bearish case is complicated by a track record of capex underestimation: last year's consensus estimate for top-five hyperscaler capex in 2026 was $525 billion; the current estimate is almost $800 billion. If analysts have systematically underestimated infrastructure spending, they may have similarly underestimated the earnings growth that flows through to Nvidia.