SpaceX’s $40B Deal Could Send THIS Stock SOARING

SpaceX is making a massive new bet on artificial intelligence. See, the company is now reportedly looking to raise $40 billion to buy even more Nvidia chips as it's building out what could become one of the largest NeoClouds in the world. But buying the GPUs is only one part of the equation. To actually deploy all of this compute, SpaceX is going to need an enormous amount of server and data center infrastructure around the chips. And there's one company that could be positioned to capture a huge piece of that spending. If SpaceX follows through on this buildout, it could create an entirely new growth opportunity for this business and potentially a very interesting opportunity for the stock. Let's talk about one of the largest SpaceX proxies that is coming out of this brand new $40 billion debt deal. I'm talking specifically about Super Microcomputers or SMCI. So, the news was posted yesterday night that SpaceX is now seeking $40 billion to fund a massive NVIDIA chip purchase. This financing will be led by Apollo where they're seeing 10 billion in bank loans and 30 billion in investment grade debt. This transaction is expected to close in 2027. On top of that, Elon said that he's decided to build exclusively on Nvidia and also called out the Vera Rubin architecture being the best supercomputer that money can buy right now. So obviously Nvidia is likely to benefit from this. In terms of them needing to raise $40 billion, this is what is very interesting. They've already just raised 85 billion in 2026 during their IPO, which brought up their cash position from 23 billion to over $100 billion. They're very cash heavy right now, but supposedly that's not enough. Whenever you go to look at SpaceX's total addressable market, the huge bulk of where they identify their opportunity is within AI infrastructure. There is definitely massive amounts of opportunity in the space side of things, but not as large all combined in just what they foresee in building data centers and offering token sales and also things like Grockbot and whatever Grock is going to become incursor in the future. This is the opportunity. That's why they're raising. Initially, we ended up seeing deals come through with Google, Reflection AI, Enthropic, and a fourth customer that has been unnamed. However, it's rumored to be Microsoft, but I don't think that they want to name it because there's a little bit of contention between SpaceX and OpenAI. And obviously, a lot of those tokens are going to eventually make its way to OpenAI through Microsoft. But we've seen a lot of these deals. They've been able to sell a lot of the compute that they're not seeing for huge amounts of profitability, way higher than the what the market rates are holding for because it's compute that's online already today. It's not into the future. It's not signing deals for 5 years from now. These companies are signing for compute starting within two weeks. And as you can see, September 30th, GPU's committed for Google. It's already in place. A lot of these deals are coming into massive infrastructure projects. So, this was broken down into two main sites so far, which is Colossus 1 and Colossus 2. Here you're looking at three buildings. All of these are major data center projects. Macroh hard, Macro harder, and MiniHard, which is this one over here. These sites were named jokingly to be the opposite of Microsoft Macrohard. Just little fun jokes, but overall, this is the site that they're working on for one of the big projects, Colossus 2. Elon Musk broke it down this way. Whenever you took a look at Colossus 1, this was 150,000 H100s, 50,000 H200s. This is a architecture that Nvidia had created a few years ago. So that was the hopper architecture. Then you have Grace Blackwell which comes in. That's the next version. Much much more powerful than the hoppers. And then eventually they want to start purchasing and setting up Vera Rubins which would be VR200s, VR300's, but we haven't got there yet. Colossus 2 was newer tech, much more powerful than Colossus 1, but at much much bigger scale. And then they said here, "Another 220,000 of the Grace Blackwell 300's or the Grace Blackwell Ultras will be fully operational next week." He sent that back in September 24th. They're already online according to his timeline here. Another 220,000 in November. And if we get lucky, yet another 220,000 Grace Blackwell 300s by late December. So, how does SMCI fit into this picture? Well, one of the things that people obviously give Elon a lot of criticism about is his timelines, saying, "Hey, will you actually get these chips set up by next week?" Well, it's one of the things that SMCI and other companies have helped with Elon, where he has delivered far beyond his expectations for delivery times. Dell and Super Micro actually provided the server racks for the Colossus One build. Elon went out even further and said it was a 50/50 split. They worked with both companies. Then we ended up seeing Colossus 2 where Elon didn't specifically talk about which companies ended up helping out, but we couldn't find anything online of Dell even being mentioned as being part of Colossus 2. However, Charles, the CEO of SMCI said, "We are proud to have co-built another new gigawatt AI data center for SpaceX and XAI within a year. It was the fastest one that they were able to turn around to complete operation and it was done by SMCI." So you saw a 50/50 split and now the only record that we have is that SMCI is working with Colossus 2, the much larger build. On top of this, whenever you talk about those Elon timelines, can he deliver on time? They're actually right now the fastest company to be able to set up data centers on Earth. I mean, their ability to set up Colossus one in essentially 90 plus days. Colossus 2, first cluster, 91 days. Colossus 2, the second cluster, 64 days. And now we're looking at setting up even more. I mean, it's likely that they're very on track, if not ahead of schedule. Most of these types of builds at gigawatt scale take 18 to 24 months. These were built in a quarter. So, they are by far the fastest here. And the reason why this is important, SMCI brings up and the reason why customers pay them is they said, I think one of our partners mentioned that if you have eight racks, it can take 30 days to make them operational. And that cost to getting to that token revenue is about $3 million. So some of these operators are looking at a 100 racks or 1,500 rack deployments. You're talking about hundreds of millions of dollars if you cannot stand up that infrastructure immediately. I think that's what the end market is looking at is time to online, time to revenue. This is what SpaceX is doing better than anyone and why potentially they're partnering with SMCI or at least a really good sign of success for SMCI is that they are the partner that is the most expensive cost is how fast can you get online. So that's really really great. Now I want to talk about SMCI's financials because this company has been in a lot of headlines, a lot of misconceptions with this company. A lot of real risks too. I don't want to blow off some of the concerns, but we'll talk about that. First off, this company has really turned around its growth profile. So, now we're starting to see sort of a new paradigm of growth ever since we started seeing a lot of these deals with SpaceX. It's their largest customer. They don't talk about who their largest customer is, but we do know that there's a large customer that that makes up for 28% of total revenue last quarter. It's believed to be SpaceX, but we're now starting to see growth rates that are in the range of 120. We saw 93% last quarter, 11 billion, much higher than where we saw year-over-year just at 5.7 billion. Next quarter is expected to be at 15 billion or at least according to Wall Street expectations. This is a triple from their year-over-year growth cuz last year we only saw $5 billion. Now we're looking at 15. So growth is expected to accelerate. This was exactly on their presentation for their Q4 2026 results that they showed off the last one. And they actually say that revenue is going to come somewhere in line of 14.5 to 15.5 billion in revenue. So actually Wall Street is just on the ever so slightly lower end of the midpoint of their guidance, not including what the upper bound is or potentially even beating that which is what they did last quarter. Now diluted EPS somewhere between 89 to 98 cents. We'll take a look at that. And non-GAAP diluted EPS potentially a $110. Let's go through some of the margin profile. Gross margins have also climbed up. While we did see three quarters of large potential revenue growth, so I can go back here. There was sort of three quarters where we saw large growth. Now, in the margin profile, it looks more like an S-curve, some actual pickup because the margin has gone from 6.3% to almost north of like 16% if not a little bit higher. $1.9 billion in gross margin. And that's following suit with operating margin. So, this is after research and development, after sales, marketing, and administrative costs. All of that company's profile looking much better than the low margins that we saw before. On top of that, we're also seeing it happen even after paying their taxes flowing all the way down to net income. Great margin profile. And some of the reason why they're seeing a pickup in these margins is due to a new way that they're selling chips or a new way that they're selling a complete holistic platform. This is what they call their DCBS. It's their one-stop shop for all AI needs. And essentially instead of just selling the racks, instead of selling individual components, they are going through the entire stack and offering everything. They're not quite there in terms of offering everything, but every single quarter they've been making more and more progress to offer more into this full holistic solution. If they know things work with their entire system, well then obviously it will fit together better. This is how Dell essentially made their entire business is you'd almost need a Dell technician to work on their services. All of it was all their own internal components. SMCI is still a little bit behind there. They work with other companies. They use their products, but they make sure that they work together. So, there's definitely still some third party, but they verify that they work before they end up setting up the data centers. And obviously, SpaceX is very happy with this solution. They said that the new DCBS platform, as we have more components and more integrations that we can do ourselves, the margin profile ends up going higher. So they can end up doing more and that actually they can charge more for doing that more holistic planning EPS. So there is definitely some dilution that's involved with SMCI EPS looking extremely good right now $162 as we ended up seeing that margin profile. Let's talk about where this company is. Total cash and cash equivalents $7.5 billion at the end of the last quarter which is in a really good financial position. They have two fabs that they just ended up purchasing not too long ago. I think it was like last year from Lummentum. This will allow them to produce even more racks. So, they're getting ready to pick up in terms of their overall scale. We'll talk about guidance. Before I do that, let's get into valuation. This company's forward price to sales is currently at 0.43. Trailing price to sales is still under one times of 74. Now, this can be normal and you don't have to have a company under one time sales to make it look cheap if the margin profile is super small. a Walmart or something would have a really low price to sales, but it's that margin profile pickup, that scurve that we're seeing in their gains that could make this change very quickly. And we already have. You can see where we were back in June, July, margin profiles were much lower. And we've actually seen some expansion here. And you've seen that in the stock as well. Even if you were to go all the way to price to earnings, if you were to account for their actual margin, whether you're looking at a trailing basis or forward basis, this company is trading at a 13 times price to earnings. Rightfully so, there's reasons to be concerned about this business, but that is where we are right now. On top of that, if we're starting to look out going forward, because we're about to get into guidance, remaining performance obligation right now, $2.6 billion, fastest growth rate that we've seen as a percent in this company. And that's looking to only pick up. And listen to this. Our fiscal year 2026 ending backlog was at a record level with over $60 billion in new orders received during Q4 fiscal year 2026. They received $60 billion in new orders in that quarter which we will be expecting to fulfill over the next coming quarters. So they end up increasing their guidance for full year fiscal 2027. They see an outlook of 65 to72 billion in revenue. That's all they showed. Of which Wall Street right now is putting them in the midpoint of that, which is showing growth of around 71.8% growth on top of a year that just grew by 77.8%. I go back to this quote that Elon Musk ended up saying. Another 220,000 GB300s will be fully operational next week. Another 220,000 in November. This was all posted in September, mind you. So this is all fiscal year 2027 for SMCI. These are not quarters that are already fulfilled. And then another 220K in late December for which SMCI also came out and said they are moving full speed ahead with SpaceX AI on a gigawatt scale AI data center buildout powered by NVIDIA GB300 systems which we just knew Elon is talking about setting up. And then on top of that, the company said, "We are also teasing a surprise Christmas gift before year end," which I think also has to do with potentially getting lucky with another 220,000 GB300s. I think that this purchase is in terms of a proxy amount, if you're talking about a company that's only at a 13 times PE, they are going to benefit greatly from this additional spend, which by the way is not included in those Elon Musk estimates. If that's to potentially accelerate even further to buy even more chips, Vera Rubin architecture which SMCI has come out and said they already have the racks and the systems built for Vera Rubin and they can deliver on Vera Rubin. They've already been approved for that. So they can do that as well, but we need to talk about why this company is so cheap. There is a ton of red flags whenever it comes to SMCI. This all started back in August of 2024 where Hindenburg Research came out and said that they are seeing a lot of really really big accounting red flags on the company. This was then followed suit by EY resigning as the company auditor saying I can no longer rely on what management is telling me. Therefore, I can't put my name behind these financial statements. Now, this had come out about seven main concerns that the company has had. Six of which since this time back in 2024 have been fully resolved and they're still waiting for some potential however very large real risks of internal controls. Takes about a year for the actual company to be compliant. So we're just sort of in a waiting phase right now but there was new subpoenas. The SEC is looking at them. There is real concern. So absolutely they could still be non-compliant and have some deficiencies with regulators. But this EY resigning was like this big red flag of oh my gosh this company is obviously doing something fraudulent. Hindenburg must have found something fraudulent. Turns out SEC did probe SMCI at the time. They didn't find anything at the time. There was nothing actually that they could tie them to that Hindenburg had pointed out. So a lot of really weird red flags that didn't come of much. This is why this company is still operating. SpaceX is still working with them. Nvidia still calls them a preferred partner. Then we ended up seeing SpaceX, one of their co-founders, his nickname is Wall-E. He ended up essentially going rogue and working with a very small team of not even SMCI employees, but contractors to essentially work with a client who has already been flagged as being a Chinese business that they will no longer take payments from. He was working on the back end essentially changing the controls to say, "Hey, we can take payments from them. We will." SMCI themselves is hinted at being the company that caught Wall-E doing this, that they kept seeing weird things in their system going, "Okay, wait. Why are we now taking payments from this company? I thought we already changed this." They changed it back like three different times and eventually ended up sending regulators over to that facility to check on the servers. Well, turns out they were using like these fake servers that didn't exist and removed those serial numbers from the actual chips to put them on those dummy servers and send the real systems to China. The co-founders no longer working with SMCI. SMCI itself was not even charged or named. They couldn't find any tie with what Wall-E was doing with what the existing management was doing. Essentially, he was going pretty rogue. Now, he was a multi-billionaire. Now, he's going to be potentially charged for treason. Like, I mean, like, it's crazy. But it's not SMCI directly, and it might have been SMCI that actually caught him doing this, that sent the regulators over there that potentially found out what the heck was going on. So, it definitely is sketchy, but this is why this company is trading at 13 times PE. Most of Hindenberg's accounting and governance allegations were investigated without evidence of fraud being found, but the export control allegations remain unsolved. This was in a recent report of the company and that is exactly where it lies right now in terms of this overall buildout and brand new SpaceX deal where they end up getting $40 billion to put towards new chips and SpaceX loves to work with SMCI and it seemingly was the main company that they ended up setting Colossus 2 up with and that's going to continue to compound as being by far their largest customer. They are continuing to take on new money. Everything's going well and they still do have some red flags. So keep that in mind whenever looking at this company. But if those are resolved, I can guarantee you there will be a very fast rerating of this business whenever we get the green light from regulators saying we're no longer looking into SMCI. They're fully compliant. Export controls look amazing and they are one of the biggest proxies of SpaceX and SpaceX is willing to pay an arm and a leg for new chips that they're essentially giving to Super Micro computer to set up. So very risky speculative play, but if you're right on this name, there's been cheaper, but you know, if you don't buy the bottom, the next best thing is to buy before it goes even higher. However, definitely real risks. I'm not currently a shareholder. I want to continue to do new work on this company. But right now, in terms of first impressions of this company, this is very interesting for a small percentage of my portfolio. That's what I'm looking at doing, but I have not made any decision just yet. But if I were to do a purchase, it would still be considered a speculative play. No more than 1% of my entire portfolio.