For a rocket company, SpaceX is spending a lot of money to build out its AI capacities.

Too much, according to investors.

The company reported revenue in its first quarterly update as a public company that surpassed analysts’ expectations. Most of its revenue came from its Starlink satellite offering.

But investor focus turned to capital expenditures related to its xAI unit, which runs the Grok AI service. Those hit $15.8 billion, higher than expectations of $13.09 billion, according to Bloomberg News data, and about double the previous quarter. The AI spending also accounted for most of SpaceX’s overall $18.4 billion quarterly spending on capital expenditures.

The report caused SpaceX shares to reverse a healthy run-up during regular trading hours Tuesday. The stock fell over 10% before Wednesday’s market open, after having surged 9% ahead of its report Tuesday.

SpaceX immediately became a multitrillion-dollar company after a record-setting IPO on June 12 — but nearly just as quickly, it erased $1 trillion in value as the stock plunged amid anticipation of insider stock sales and broader jitters about the pace of AI spending.

Still, it continues to enjoy a market valuation of more than $1 trillion, making it one of the most valuable companies in the world. The stock got an additional boost Tuesday when the company announced a deal with Nvidia to partner on a future satellite project.

That announcement sent shares of other data center infrastructure providers like AMD lower. SpaceX’s strong results in its Starlink connectivity division also knocked shares of major wireless carriers, including AT&T and Verizon, as well as Viasat, which now faces competition from SpaceX for providing uplinks on airplanes.

Investor speculation that SpaceX may try to merge with its sister company Tesla has grown. That would give Elon Musk even more control over his multifaceted technology empire than he already exerts.

The vast majority of SpaceX’s stock is privately held, with just 5% of the 13.9 billion shares trading on the open market.

Along with Musk, who owns about 42%, the other shareholders are known to regulators as “insiders” and have been barred so far from selling their shares.

That “lockup period” will expire Wednesday, when up to 20% of the total SpaceX shares held by insiders may be sold on the open market.

More shares on the market equals more supply, which means the price per share is likely to fall further.

But some retail investors aren’t concerned by the steep drop in SpaceX’s share price.

Forde Todd, 20, received three shares of SpaceX stock as part of the company’s IPO, then bought and sold several more on the open market.

Todd told NBC News he plans to hold on to his IPO shares despite the stock’s plunge.

“I’m in it for the love of the game — like, I’m in it for SpaceX,” Todd said. “I truly believe in this company.”

“At the end of the day, everybody is going to want a part in the space economy,” he added.

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New York’s attorney general sued prediction market operator Kalshi on Friday, claiming that its platform violates state laws against illegal gambling.

In a petition filed in a state court in Manhattan, Attorney General Letitia James said Kalshi failed to obtain a New York State Gaming Commission license to operate its platform, where people trade based on the predicted outcomes of sports, elections and other events.

The attorney general said such platforms can encourage problem gambling, including by people under age 21, and endanger people’s financial, emotional and physical health.

She filed similar petitions in April against two other prediction market operators, Coinbase Financial Markets and Gemini Titan, saying all three companies’ so-called event contracts were “quintessentially” gambling.

“New York’s gambling laws protect children from underage betting and help combat gambling addiction,” James said in a statement. “No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple.”

CFTC Challenges New York

Prediction markets such as Kalshi and Polymarket have soared in popularity since the 2024 U.S. presidential election, when they fared better than pollsters in predicting Republican Donald Trump’s victory over Democrat Kamala Harris.

Their growth has sparked a flurry of lawsuits and countersuits over the authority of individual U.S. states, rather than the federal government, to regulate the industry.

The U.S. Commodity Futures Trading Commission has claimed exclusive oversight and challenged regulatory activity in at least nine states including New York, which it sued in April.

“It’s sad to see this type of political theater from the leadership in our own state,” New York-based Kalshi said in a statement. “States can’t just shut down a federally licensed exchange.”

Less than one hour before New York sued Kalshi, the CFTC filed an “emergency” motion in Manhattan federal court to stop the state’s enforcement activity, calling it “overreach” that would irreparably harm the agency and markets it regulates.

The CFTC filing followed Wednesday’s rejection by the federal appeals court in Manhattan of Kalshi‘s request to avoid being subjected to New York’s gambling laws, while it appeals U.S. District Judge Analisa Torres’ refusal on July 8 to issue an injunction against the state.

Kalshi had preemptively sued New York last October to block enforcement.

According to New York’s petition, Kalshi‘s prediction markets are gambling because people can wager on events whose outcomes they don’t control, such as who will win the Super Bowl or the reality TV show “Big Brother.”

New York also objected to Kalshi letting 18- to 20-year-olds use its platform, despite a minimum age of 21 under state law for mobile sports betting.

“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” New York Governor Kathy Hochul said in a statement. “This choice has consequences.”

At least four states — Massachusetts, Michigan, Nevada and Washington — have won court orders restricting Kalshi‘s activities.

In refusing to stop potential New York enforcement activity, Torres found the state’s interests in preventing gambling addiction, preserving the integrity of sports, and avoiding ​a proliferation of unregulated contracts “heavily” outweighed Kalshi‘s interests in ensuring the primacy of federal law and avoiding “intractable” technology issues for customers.

New York’s lawsuit seeks a halt to Kalshi‘s alleged unlawful conduct, the forfeiture of illegal gains, civil fines equal to triple those gains, and restitution to customers.

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