Renowned short-seller Jim Chanos has highlighted a stark warning buried in Morgan Stanley’s new bullish research report on Elon Musk’s Space Exploration Technologies Corp. (NASDAQ:SPCX).

Despite assigning the company an “Overweight” rating, the underwriter disclosed that the space and AI giant faces a multi-year “Funding risk” totaling nearly $700 billion, with “no FCF-positive” cash flow projected until 2035.

Chanos Calls Out Wall Street Optimism

Chanos took to social media platform X to highlight the sharp contradiction between the bank’s optimistic $300 price target and its underlying financial anxieties.

“I know we are only halfway through the year, but I feel it will be hard to top this comment from one of the obligatory buy recommendations on $SPCX issued by one of the underwriters this week,” Chanos posted, calling the equity research disclosure “truly glorious.”

I know we are only halfway through the year, but I feel it will be hard to top this comment from one of the obligatory buy recommendations on $SPCX issued by one of the underwriters this week. It is truly glorious. pic.twitter.com/TK3f8woHmb

— James Chanos (@RealJimChanos) July 8, 2026

Read Also:Morgan Stanley Analyst Initiates SpaceX Coverage, Sees Nearly 90% Upside for Elon Musk’s SPCX

The $672 Billion Cash Hole

The snippet shared by Chanos reveals the steep cost of SpaceX’s physical infrastructure scaling. In the report, Morgan Stanley analysts wrote under a dedicated “Funding risk” section: “We forecast no FCF-positive year before 2035 and average external capital needs of roughly $84bn per year from 2027 to 2034.”

Over those eight years, the required external capital totals approximately $672 billion. The underwriter explicitly warned that if debt markets cannot absorb these astronomical financing needs, SpaceX may be forced to “issue equity, reduce growth investment, or slow deployment.”

High spending needs, including an estimated $300 billion in annual capex by 2031, make securing this external capital “one of the greatest risks to our forecasts,” noted Morgan Stanley.

High Risks vs. High Targets

Morgan Stanley’s base case relies on massive long-term Total Addressable Market (TAM) creation, forecasting SpaceX’s revenue to surge to $3.3 trillion by 2040.

However, the immediate execution risks remain severe. The bank set an intentionally wide valuation range, spanning from a $75 bear case to a $600 bull case, balancing the company’s unique technology against what is now exposed as a monumental capital hurdle.