Key Insights
- SpaceX stock has broken below the lower boundary of a rising wedge on the supplied chart, weakening its short-term technical structure.
- SpaceX spent $15.83 billion on its AI segment during Q2, while total quarterly capital expenditures reached $18.37 billion.
- SpaceX carries a market capitalization near $1.9 trillion, creating valuation risk despite rapid revenue growth and bullish Wall Street targets.
SpaceX stock faces renewed downside risk after breaking below the lower boundary of a rising wedge on the supplied daily chart.
SPCX recently traded around the $139–$142 region after rebounding sharply from its Aug. 3 low of $104.83. The stock reached an August high of $149.80 before losing momentum near the $150 resistance area.
The technical weakness comes as investors assess SpaceX’s rapidly expanding artificial-intelligence spending following its acquisition of xAI. Q2 results showed strong revenue growth, but AI capital expenditure increased dramatically and the company remained unprofitable.
SpaceX Stock is Facing Technical Risks
SPCX stock has bounced back in the past few weeks, rising from a record low of $104.80 in August to a high of $149.62. Since then, the stock has faced substantial technical challenges that may lead to a strong near-term retreat.
One of the risks is that it has formed a rising wedge pattern whose two lines are about to converge. It has now moved below the lower line of this pattern.
The stock has also remained below the important resistance level of $149.62, its highest swing on August 12 and 17. It has also formed a bearish divergence pattern as the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued to fall.
The other risk is that the Average Directional Index (ADX) has continued moving downwards. ADX is an indicator that provides more information on the strength of a trend. A trend is said to be strong when the ADX has moved above 20 and is pointing upwards.
SpaceX is Facing Major Risks
On the positive side, SpaceX has some major catalysts, including its strong revenue growth. Its recent earnings report showed that its revenue jumped to $7.8 billion in the second quarter from $4 billion in the same period last year.
All its businesses – space, connectivity, and AI – experienced growth, with Starlink being the biggest one. Starlink’s number of users crossed the 12 million milestone, and its growth may continue in the foreseeable future.
Another positive is that analysts remain optimistic about its business, with the consensus estimate being $220, up by 57% from the current level. Some of the most optimistic analysts are from companies like Bernstein, Morgan Stanley, Arete Research, Oppenheimer, and Wells Fargo.
Still, despite this optimism, the company faces some major risks that may impact its business in the long term. One of the risks is that its booming data center business is experiencing substantial delays. As a result, media reports suggest that it is attempting to overhaul its data center team. These delays may ultimately cost it billions of dollars over time.
The company is also facing the challenge of the rising memory, GPUs, storage, and construction costs. As a result, its AI capital expenditure jumped to $15 billion in the second quarter from $7.7 billion in the same period last year. The metric soared from $3.3 billion in the first half of last year to $23.5 billion this year. This spending explains why it had negative free cash flow in Q2.
SpaceX is also facing other challenges. One of the most notable one is that the AI chatbot industry is facing significant competition. For example, Grok, its chatbot, is seeing competition from other mainstream names like Google Gemini, Anthropic’s Claude, and OpenAI’s ChatGPT.
Just this week, Meta Platforms announced that its AI model will be significantly cheaper than Grok and other models. At the same time, many Chinese AI models like Kimi and DeepSeek are gaining market share. Grok maintains a market share of less than 10%.
Most notably, SpaceX is a highly overvalued company, considering that it has a valuation of over $1.9 trillion and is still losing billions of dollars each quarter.
This article is for informational purposes only and does not constitute financial advice. Equity markets can experience sharp price movements.
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