Key Points
The June 12 initial public offering of Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, shattered the record for the largest Wall Street IPO in history. That was only the beginning of a whirlwind of events for Elon Musk’s business.
Just days later, on June 16, SpaceX announced its acquisition of artificial intelligence start-up Cursor for a whopping $60 billion. Then on June 22, the company issued its first bonds, selling $25 billion worth of debt.
These activities illustrate the broader trends occurring across the technology sector. Get ready for a wild ride ahead as tech companies maneuver for dominance in the rapidly evolving artificial intelligence landscape.
SpaceX demonstrates the mounting price for AI
The race is on for leadership positions in the artificial intelligence era. Achieving one will be no small task, as SpaceX’s recent moves indicate.
Its acquisition of Cursor demonstrates that it recognizes the importance of creating a robust AI platform — but it also shows the high costs involved. Cursor is a software development solution built on artificial intelligence that allows users to significantly accelerate programming tasks. It’s proven popular, producing over $1 billion in annualized sales last year.
SpaceX is far from alone here. Others in the tech space are rushing to snatch up AI businesses. On June 15, customer relationship management titan Salesforce announced it was spending $3.6 billion to acquire Fin, which provides an AI agent to answer customer inquiries.
Along with acquisitions, AI brings other expenses, particularly related to infrastructure. SpaceX’s inaugural bond offering is part of the company’s financial maneuverings to position it for the capital commitments to come.
Building and powering the vast server farms required to create and support increasingly sophisticated AI systems requires enormous levels of capital expenditures.
The tech industry’s costly AI pursuit
Several businesses in the tech sector are facing the stark reality that AI infrastructure is expensive. Oracle, which provides cloud infrastructure for AI, warned, “We must incur significant capital and operating expenditures to increase our existing data center capacity.” To fund its AI infrastructure build-out, Google parent Alphabet recently announced a massive $84.75 billion equity capital raise.
Tech giant Meta Platforms increased its 2026 capital expenditure projection to a range between $125 billion and $145 billion. Last year, its capex to boost its AI capabilities was $72 billion. Wall Street was taken aback by this year’s prodigious spending plan, and sold off Meta shares in response. The stock was down by nearly 20% over the past 12 months through July 2.
Accelerating AI costs are hitting many tech companies, even those that aren’t directly investing in infrastructure. This year, Uber blew through its annual AI budget in four months, and management is questioning whether the outcomes are worth the expense.
Uber’s sentiment extended to Wall Street, where concerns over rapidly rising AI costs led to a tech sector sell-off in June. SpaceX shares, which soared to $225.64 post-IPO, crashed to $147.11 on June 23.
Until clarity emerges on whether all the AI spending is worth it, volatility is likely to persist across the technology sector. While it does, remember that the smart strategy is to keep a cool head and focus on the long-term performance of the tech companies in your portfolio, not their short-term stock oscillations.
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Robert Izquierdo has positions in Alphabet, Meta Platforms, Oracle, Salesforce, and Uber Technologies. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Oracle, Salesforce, and Uber Technologies. The Motley Fool has a disclosure policy.
