* Three compute agreements with AI firms may generate

roughly $28 billion yearly

* SpaceX spent about $12.7 billion on AI capital expenditure

in 2025

* Analysts see orbital computing contributing meaningfully

only in the next decade

* Colossus facilities provide roughly 1 gigawatt of compute,

among the world's largest AI clusters

By Akash Sriram

July 10 (Reuters) - Elon Musk may have pitched a future

where space powers AI, but Wall Street analysts say SpaceX's

near-term value remains firmly tethered to Earth, where it is

building out the infrastructure underpinning the AI boom.

Infrastructure providers, particularly data centers, are

poised to be among the biggest beneficiaries of the AI boom as

businesses and consumers rapidly adopt the technology for

applications ranging from software coding and robotics to

everyday tasks such as shopping and planning.

SpaceX, a major AI player, has already started monetizing

compute by striking deals with enterprise customers, including

Anthropic, for its Colossus supercomputer clusters. In contrast,

its orbital AI plan remains a longer-term opportunity that

depends on the introduction of Starship rockets, lower launch

costs and technological advances.

Company filings analyzed by Reuters and commentary from

research houses show that revenue from its latest compute

contracts is set to far exceed sales from other segments this

year.

"The narrative that (orbital) will fundamentally disrupt

terrestrial data centers is a little bit overblown. Any kind of

displacement of terrestrial data centers is 10 years plus out,"

said Anthony Milovantsev, a partner at consultancy firm Altman

Solon.

J.P. Morgan expects SpaceX to expand terrestrial AI compute

capacity to about 9 gigawatts by 2029 - roughly equivalent to

four times the power generated by the Hoover Dam.

"Beyond 2029, we expect SpaceX to pivot to orbital compute

for incremental capacity additions, while continuing to operate

and maintain its terrestrial compute clusters," the brokerage

said.

TERRESTRIAL COMPUTE BEGINS TO PAY OFF

SpaceX's deals with Anthropic, Alphabet's Google

and Reflection AI for its Colossus compute facilities are

expected to generate more than $28 billion in annual revenue.

That figure far exceeds SpaceX's 2025 AI revenue of about

$3.2 billion and surpasses revenue from its launch and Starlink

connectivity businesses individually, according to Reuters

calculations.

Analysts cautioned that the contracts contain termination

provisions and should not be viewed as guaranteed long-term

recurring revenue.

SpaceX invested nearly $18 billion in AI infrastructure and

development in 2025, including about $12.7 billion in AI-related

capital expenditure and $5.1 billion in AI research and

development, dwarfing spending on its space and connectivity

businesses, according to company filings analyzed by Reuters.

Colossus and Colossus II together provide roughly one

gigawatt of AI compute capacity, placing SpaceX among the

world's largest AI compute operators. Analysts expect that

footprint to expand several-fold over the next few years.

Several brokerages also cite SpaceX's $60 billion

acquisition of AI coding startup Cursor as evidence the company

is expanding beyond infrastructure into enterprise software,

allowing it to monetize both AI applications and the computing

capacity behind them.

ORBITAL AI REMAINS A LONG-TERM BET

Most brokerages that initiated coverage of SpaceX following

its IPO are treating orbital AI as a longer-term opportunity,

while basing their near-term financial forecasts around

terrestrial AI infrastructure.

"We view the long-term viability of orbital data centers as

unproven and highly dependent on key technological milestones

that have yet to be fully realized," BofA analysts said in a

note.

Analysts broadly expect terrestrial compute to drive

SpaceX's growth and earnings for the rest of the decade, with

orbital AI dependent on Starship achieving rapid reusability,

lower launch costs and advances in satellite engineering.

Most say that Starship may eventually help deploy

solar-powered computing satellites that could reduce costs

associated with energy, cooling and land - some of the bugbears

of terrestrial data centers.

The debate, analysts say, is no longer about SpaceX's

ability to build and monetize AI infrastructure. Rather, it is

more about how quickly it turns that opportunity into a viable

business beyond Earth's atmosphere.

(Reporting by Akash Sriram in Bengaluru; Editing by Anil

D'Silva)