Bernstein: SpaceX turbine move may be a buying opportunity for Howmet

SpaceX's intention to produce its own industrial gas turbine blades and vanes represents minimal risk to Howmet Aerospace (NYSE:HWM) and may actually present a chance to buy shares after recent declines, according to Bernstein analysts.

Elon Musk has stated that SpaceX plans to manufacture these components as it targets the installation of 20 gigawatts of behind-the-meter power capacity by late 2027, intended for terrestrial AI data centers in Bastrop, Texas.

Howmet holds over 50% share of the industrial gas turbine blade casting market, with its most dominant positions in high-end turbines. Musk has previously pointed to the industry bottleneck created by the limited number of suppliers controlling production.

However, Howmet has secured long-term contracts with every leading industrial gas turbine manufacturer, which offers some insulation if SpaceX decides to internalize production. The company’s first capacity expansion went live in Q2, with at least six additional expansion projects on the horizon. Its industrial gas turbine segment saw 38% revenue growth in that quarter.

These agreements reportedly run until roughly 2030, aligning with Musk’s observation that turbine blades are essentially booked solid through that timeframe.

SpaceX’s move to develop its own capacity might instead highlight how constrained the market has become amid rising power-generation demand, rather than indicating a negative outlook for Howmet.

Scaling up production of these parts carries technical hurdles. SpaceX could face difficulties ramping to volume manufacturing fast enough to achieve its power expansion goals in the coming 18 months.

SpaceX’s manufacturing push is anticipated to concentrate mainly on meeting its own needs, rather than evolving into a major external supplier that competes with Howmet across the wider turbine market.

Bernstein maintains an Outperform rating on Howmet with a price target of $328, implying roughly 24% upside from the stock’s August 28 close of $264.85.