Cryptocurrency prediction markets indicate a declining probability of an official agreement between Space Exploration Technologies Corp. and Alphabet Inc. subsidiary Google to build orbital data centers. Polymarket currently assigns a 13% chance of such a deal being announced before Dec. 31, a sharp drop from 53% a month ago and a peak of 81%. The resolution criteria require an official agreement regarding launching, developing, operating, or partnering on data centers in Earth's orbit.

Strategic Developments

Despite the low odds, discussions between the two entities have been reported. In May, reports surfaced that SpaceX and Google were in talks for a launch deal, with Google planning prototype satellite launches by 2027. Google CEO Sundar Pichai has suggested that "tiny racks of machines" in satellites could become a standard method for building data centers within a decade.

Musk's Vision for Orbital Compute

SpaceX CEO Elon Musk has been a vocal proponent of orbital computing, expressing confidence that the company could build orbital data centers as soon as next year. He has argued that space-based computing is inevitable because it offers a "trillion times" more scale than terrestrial alternatives. This vision aligns with SpaceX's broader strategy to position AI infrastructure as a growth business beyond launch services and Starlink connectivity.

Market Context

The skepticism from prediction markets contrasts with the long-term strategic interests of both companies. SpaceX continues to explore the leasing of AI computing power to the U.S. government, aiming to demonstrate space-based AI computing infrastructure by late 2027. Meanwhile, Alphabet faces competition from other cloud providers seeking to expand their infrastructure capabilities.

SpaceX shares rose 0.63% in after-hours trading after closing 6.70% lower at $115.26 during the regular session.

Space Exploration Technologies Corp shares have fallen approximately 47% from their June peak, a drop economist Peter Schiff previously cited as evidence that the artificial intelligence-induced stock bubble has popped. However, ARK Invest CEO Cathie Wood is standing firmly behind the company, arguing it could become the most important company in global history due to its opportunities in global telecommunications through Starlink. Her comments come as the stock faces pressure from intensifying low-cost competition and ahead of a widely watched share unlock.

Wood’s conviction has been backed by significant action. Over the past several weeks, ARK Invest has repeatedly added to its SpaceX position, accumulating roughly $129 million in purchases. These buys included approximately $54 million last week, another $57 million earlier this week, and about $18 million following a recent Starship launch delay. The purchases were distributed across several flagship ARK ETFs, including the ARK Innovation ETF (ARKK), ARK Autonomous Technology & Robotics ETF (ARKQ), ARK Next Generation Internet ETF (ARKW), and ARK Space Exploration & Innovation ETF (ARKX).

ARK ETFs Increase Exposure

Rather than trimming positions after the stock's decline, ARK has used the weakness to accumulate shares. Among its funds, ARKX has become one of the most SpaceX-heavy diversified ETFs in the market. Following the latest purchases, SpaceX accounts for about 8% of ARKX's assets, making it the fund’s largest holding. This concentrated bet contrasts with traditional aerospace and defense ETFs, which typically allocate toward established contractors like RTX Corp, Lockheed Martin Corp, and Northrop Grumman Corp.

SpaceX-Focused ETFs Gain Spotlight

Wood’s optimism is likely to renew interest in ETFs designed specifically to capture SpaceX’s growth story. Several recently launched funds provide concentrated exposure, including the ProShares Ultra SpaceX (SPCF), Tradr 2X Long SpaceX Daily ETF (SPCM), Defiance Daily Target 2X Short SPCX ETF (SPCQ), and Kurv SpaceX Enhanced Income ETF (XSHP). These funds are built around SpaceX and its expanding ecosystem—such as Starlink satellite broadband, Falcon launch services, and Starship—offering investors a way to participate without owning the stock directly.

Valuation and Upcoming Catalysts

Despite the bullish sentiment from Wood, valuation concerns persist. The Future Fund LLC Managing Partner Gary Black argues the current valuation is mathematically unjustified given a forward enterprise value-to-revenue multiple of about 40 times, noting no historical precedent for a trillion-dollar company sustaining such a multiple. Former hedge fund manager Whitney Tilson also described the stock as nearly 10 times overvalued. However, Wall Street remains broadly bullish, with Raymond James Financial Inc. initiating coverage with a strong buy rating and an $800 price target, projecting Starlink’s revenue will reach $837 billion in 2031.

Investors are now focused on the upcoming earnings report and the expiration of the IPO lockup period. Roughly 20% of outstanding shares are expected to become eligible for trading following the next earnings report, raising concerns that early investors may realize gains. Analysts project revenue will jump to $6.87 billion in the second quarter and rise to $12 billion in the third quarter, driven by its data center business and major deals with Alphabet, Anthropic, and Reflection AI.