What happened
SpaceX reported 247% revenue growth in its AI segment in Q2, driven by cloud services deals with Alphabet and Anthropic. CEO Elon Musk announced SpaceX will build exclusively on Nvidia's Vera Rubin superchip and plans to reach over 2 gigawatts of compute by year-end, scaling to several times higher by end of next year. Wall Street analysts project Nvidia's earnings will grow 45% annually over the next three years, giving it a price-to-earnings-to-growth ratio of 0.75—the lowest in five years.
Why it matters
SpaceX's decision to use only Nvidia systems signals the company's confidence in Nvidia's technology and removes uncertainty about competing chip architectures. The commitment comes as SpaceX emerges as a potential sixth major hyperscaler (alongside Alphabet, Amazon, Meta, Microsoft, and Oracle); Morgan Stanley estimates SpaceX will invest $110 billion in AI infrastructure in 2028, representing annual growth of about 100%. Nvidia's 90% market share in data center accelerators makes it the cornerstone of the infrastructure buildout that hyperscalers are funding—Wall Street expects the top five alone to spend about $800 billion on AI infrastructure in 2026.
What to watch
Among 65 analysts, Nvidia has a median target price of $300 per share, implying 33% upside from its current share price of $225. Wall Street has repeatedly underestimated hyperscaler spending; the consensus estimate for top-five capex in 2026 rose from $525 billion last year to almost $800 billion now, suggesting analysts may also be underestimating Nvidia's future earnings growth.
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Nvidia's dominance in AI infrastructure is reinforced by SpaceX's exclusive commitment to its chips. The company controls nearly 90% of the data center accelerator market and has diversified into networking and CPUs, making it the foundational layer of the hyperscaler buildout. SpaceX's decision to standardize on Vera Rubin eliminates architectural fragmentation and signals confidence in Nvidia's technical roadmap—a vote of confidence that may influence other large enterprises evaluating chip suppliers.
The scale of planned investment underscores why Nvidia's valuation may not yet reflect the reality of AI infrastructure spending. The top five hyperscalers (Alphabet, Amazon, Meta, Microsoft, and Oracle) are now forecast to invest about $800 billion in AI infrastructure in 2026, far exceeding last year's $525 billion estimate. Total AI-related capex is projected to top $1 trillion. SpaceX, which reported $13 billion in AI-related capex in 2025 but has already surpassed that through mid-2026, represents incremental demand beyond the traditional five. If Wall Street's capex estimates have lagged reality by this margin, earnings growth projections for Nvidia—currently set at 45% annually over three years—may similarly underestimate the company's medium-term revenue trajectory.
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