SpaceX plans 1-gigawatt Texas AI data center; Morgan Stanley warns Elon Musk's xAI capex ambitions could reach $120 billion by 2030.
On July 22, SpaceX shares hit a new all-time low, falling 5.32% to $116.97, amid mounting investor concerns over the company's aggressive artificial intelligence capital expenditure strategy. xAI's Q1 spending surged to $7.7 billion—approximately triple the prior-year period—signaling an accelerating cash burn that has sparked skepticism about the sustainability of this expansion path.
Morgan Stanley analysts project that xAI will consume up to $120 billion in combined cash between 2026 and 2027, a figure nearly 1.6 times SpaceX's $75 billion IPO proceeds. The bulk of SpaceX's capital expenditure trajectory is now driven by xAI, which recorded an operating loss of $6.36 billion in 2025—the company's largest loss center. By comparison, Starlink's 2025 operating profit of $4.423 billion is effectively subsidizing xAI's expansion.
According to The Information, xAI has begun surveying multiple sites across Texas and laying groundwork for at least one large-scale data center matching the gigawatt-level capacity of its existing Memphis campus. The company has already deployed some existing data center staff to the region and recently posted numerous infrastructure and job openings in Austin, Bastrop, and Corone. Currently, xAI operates approximately 1 gigawatt of computing power across two data centers, equipped with hundreds of thousands of Nvidia GPUs.
The company is evaluating multiple approaches for its Texas expansion: constructing data centers from scratch or retrofitting existing warehouses—a model it employed successfully when converting an abandoned manufacturing facility in Memphis into its flagship data center.
Two near-term catalysts will test investor confidence. SpaceX will release its first quarterly earnings report as a public company on August 4. Q1 Starlink data released previously showed revenue of $3.257 billion, profit of $1.188 billion, and user growth exceeding 10.3 million subscribers, though average revenue per user (ARPU) declined to $66 from $99 in 2023. Analyst Julie Zhu of Moffett Nathanson stated that there is currently no credible financial model that can support the company's valuation—with Q2 data now poised to verify whether the growth trajectory remains sustainable.
August 6 will trigger the largest lock-up expiration in market history. Approximately 911.5 million shares from early investors and private market buyers—representing roughly $116 billion in market value at current prices—will become eligible for sale for the first time. Many shareholders, holding substantial unrealized gains, may seek to cash out.
Short sellers are significantly increasing their exposure ahead of these catalysts. S3 Partners data indicates that approximately 206 million shares are currently shorted, representing 32% of the float with a nominal short position valued at roughly $25 billion. Just one month prior, short interest stood at only 40 million shares, or 5–7% of the float. Matthew Unterman, head of research at S3 Partners, said: "We are seeing short sellers continue to increase their exposure as several key catalyst events approach, including the company's first earnings report as a public company and the subsequent lock-up expiration."