SpaceX Turbine Plans a 'Minimal Threat' to Howmet Aerospace, Says Bernstein

Recent stock weakness in Howmet Aerospace (NYSE:HWM) following news of competition from SpaceX represents a potential buying opportunity, not a long-term threat, according to analysts at Bernstein. The firm maintains that SpaceX's plans to manufacture its own industrial gas turbine (IGT) blades pose a minimal risk to the aerospace components giant.

SpaceX's Self-Supply Strategy

The market concern stems from an announcement by Elon Musk that SpaceX intends to produce its own IGT blades. The initiative aims to support the installation of 20 gigawatts of behind-the-meter power capacity for a land-based AI data center in Bastrop, Texas, by the end of 2027.

Musk has previously cited production bottlenecks caused by the high degree of control held by a small number of suppliers as a key challenge for the industry. SpaceX's move toward vertical integration is intended to address this supply chain constraint for its own ambitious projects.

Howmet's Entrenched Market Position

Bernstein notes that Howmet is well-defended against new entrants. The company holds a dominant market position, with over 50% of the market share for IGT blade castings and a particularly strong competitive advantage in high-end turbines.

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Key factors insulating Howmet include:

• Long-Term Agreements (LTAs): The company has secured LTAs with every major IGT manufacturer, with contracts expected to run until around 2030.
• Proactive Expansion: Howmet is already scaling up production. Its first new capacity came online in the second quarter, with at least six additional expansion projects underway.
• Strong Performance: The company's IGT business demonstrated robust demand, growing 38% in the most recent quarter.

Analyst Perspective: A Sign of Market Tightness

According to Bernstein, SpaceX's decision to self-produce highlights just how tight the supply market has become amid soaring power generation demand, rather than signaling a weakening outlook for Howmet. The analysts point out that mass-producing these components involves a significant technical barrier to entry, and it remains uncertain if SpaceX can achieve the necessary scale within its 18-month timeline.

SpaceX's efforts are expected to focus primarily on satisfying its internal demand, not on becoming a broad-market supplier that would compete directly with Howmet. Bernstein reiterated its "Outperform" rating on HWM with a price target of $328, suggesting approximately 24% upside from its closing price of $264.85 on August 28.