Howmet's Turbine Blade Scare: A Customer's Self-Service, Not a Competitor

On August 29, Elon Musk posted on X that SpaceX would bring turbine blade casting in-house at a facility in Texas. The goal: cut generator delivery times by 18 months. The reaction: Howmet Aerospace shares dropped 7.7% the next day, their worst single-day decline in 16 months, and continued falling over the following week to end roughly 21% below their August highs.

The market read Musk's post as a threat. The bulls and bears agree on the facts that follow. The fight is over what those facts are worth.

Shared record

As of September 10, 2026. Howmet Aerospace (NYSE: HWM) closed at $227.91, down $54 from a 52-week high of $281.94 (near its August peak) but still up roughly 30% over the trailing year. Market capitalization: $90.9 billion. Enterprise value: $94.8 billion.

Second quarter 2026 results (reported August 6): Revenue of $2.55 billion, up 24% year over year (21% organic). Adjusted EPS of $1.33, up 46% year over year. Adjusted EBITDA margin expanded 340 basis points to 32.1%. Free cash flow of $479 million, contributing to $838 million year-to-date. The company raised full-year 2026 guidance across revenue, EBITDA, EPS, and free cash flow.

The gas turbine business, the center of this debate: Howmet controls more than half the global market for turbine blade castings used in industrial gas turbines — a niche where only four foundries worldwide can produce the single-crystal blades required for high-efficiency engines. In Q2 2026, gas turbine revenue grew 38% year over year, driven by demand for portable natural gas generators to power AI data centers. One batch of these blades currently takes 60 to 90 weeks from start to finish.

The SpaceX announcement: Musk said SpaceX would cast turbine blades and vanes at a foundry in Bastrop, Texas, to serve its own expanding power needs for AI data center infrastructure. The stated aim was to bypass the existing supply queue, which stretches into 2030.

Valuation: Howmet trades at approximately 49 times trailing twelve-month earnings and 61 times forward earnings. Enterprise value to trailing EBITDA is roughly 34 times. For comparison: GE Aerospace trades at 37 times trailing earnings and 31 times EV/EBITDA; RTX trades at 35 times trailing earnings and 20 times EV/EBITDA. Howmet carries the highest multiple in this group by a wide margin.

What the market misread

The selloff assumed SpaceX is about to become a merchant blade supplier — a new foundry selling into the same market that makes Howmet valuable.

That assumption doesn't match what Musk actually said. SpaceX is not launching a blade business for the open market. It is trying to solve a captive power problem for its own AI data center build. The company reportedly purchased a portable gas and diesel turbine fleet for roughly $1 billion and needs new generators faster than the current supply chain can deliver. Casting blades in-house is a self-service workaround, not a competition play.

Even if SpaceX eventually produces qualified blades at scale, they would be consumed internally. Howmet's customer base spans dozens of turbine manufacturers, utility companies, and commercial and defense aerospace programs across North America, Europe, and Asia. One customer solving its own bottleneck doesn't displace Howmet's merchant volume — it confirms that the queue is real and that the bottleneck is real.

The moat: qualification, not just casting

There is a difference between saying you will cast a blade and producing a blade that an OEM will certify for an engine that spins at thousands of degrees Fahrenheit. Aerospace-grade turbine blade casting involves exotic metallurgy, single-crystal structures, multi-year OEM qualification processes, and yield rates that take years to optimize. That is why only four foundries on earth can do it.

Bernstein — which maintains an Outperform rating on Howmet with a $328 price target — argues that SpaceX faces significant technical hurdles and a multi-year timeline before producing qualified parts. Channel checks suggest the same. Howmet's management told investors in August that even its own new capacity commitment won't arrive before August 2028, citing machine tool queue constraints. If Howmet — an existing leader with deep expertise — can't bring capacity online for two years, the barrier to entry for a startup foundry is self-evident.

The bull wins this round. The market priced an immediate competitive threat that doesn't exist. The technical moat and qualification timeline protect Howmet's position for the foreseeable future.

The broader business: gas turbines are a tailwind, not the whole engine

Here is a fact that cuts both ways: gas turbines are a small but fast-growing segment of Howmet's business, not its center of gravity.

In Q2 2026, Howmet's four segments produced these results:

• Engine Products (commercial and defense aerospace components): $1.37 billion in revenue, up 32% year over year, with a 37.7% adjusted EBITDA margin. This is Howmet's core business.
• Fastening Systems: $589 million, up 37%, margin 30.1%.
• Forged Wheels (truck and trailer): $316 million, up 14%, margin 27.8%.
• Engineered Structures: $269 million, down 13% due to the divestiture of a lower-margin facility.

Engine Products alone account for roughly half of Howmet's revenue. Commercial aerospace grew 28%. Defense aerospace grew 11%. The gas turbine segment, while surging at 38%, is a component within Engine Products — not the entire company. Even if SpaceX or other vertical integrators eventually erode the industrial gas turbine niche, Howmet's commercial and defense aerospace aftermarket remains largely untouched.

Spares revenue across commercial aerospace, defense, and gas turbines rose 37% in Q2. These aftermarket parts are independent of new aircraft production cycles and represent recurring, high-margin work. That is the part of Howmet that no foundry in Bastrop reaches.

The bear's best punch: the price demands perfection

The bull has the better evidence on SpaceX. But the bear has a point that matters more for the stock at this price.

Howmet trades at 61 times forward earnings. That is a premium that requires sustained double-digit revenue growth, continued margin expansion, and near-flawless execution across every segment. The gas turbine boom — fueled by AI data center power demand — is the catalyst that has driven the multiple higher. But it is also the variable most likely to normalize. AI power build is still in its early, capital-intensive phase. If turbine demand growth decelerates, even modestly, the multiple could compress faster than earnings grow.

Consider the scale: Howmet's market cap is $90.9 billion with $94.8 billion in enterprise value, yet it generates roughly $2.2 billion in trailing operating cash flow and $1.8 billion in free cash flow. The enterprise value to free cash flow multiple is approximately 52 times. That is a price that leaves no room for error. A 21% stock decline from the August high barely scratches the surface of a multiple contraction that could occur if growth decelerates.

The forward P/E of 61 implies that 2027 and 2028 earnings must compound at roughly 20-25% annually to justify today's price at even a modest multiple. If gas turbine growth normalizes from its current 38% pace and commercial aerospace slows as the post-pandemic backlog normalizes, those compound rates become difficult to sustain.

The bear wins this round. The business case may be solid, but the stock price demands outcomes that are not guaranteed.

The confirmation, not the threat

If SpaceX's announcement didn't threaten Howmet, what did it reveal?

Three days after the selloff, GE Aerospace announced it would acquire Consolidated Precision Products for $11.75 billion. GE's move confirms exactly what Howmet has been telling investors: casting capacity is the bottleneck of the decade. If the industry's largest engine manufacturer is spending $11.75 billion to secure its own foundry, the market for casting is not a commoditizing industry in decline. It is a supply-constrained bottleneck that commands premium pricing.

GE is buying capacity because it can't get enough. SpaceX is building capacity because it can't get enough. These are not bearish signals for Howmet. They are validation of the same scarcity premium that justifies — or overjustifies, depending on your view — its valuation.

What the price requires

At $228, with a forward P/E of 61, the market is pricing in:

• Revenue growing 20%+ through at least 2028, supported by sustained gas turbine demand, commercial aerospace recovery, and defense spending.
• Adjusted EBITDA margins staying above 32%, with further expansion from operating leverage and product mix.
• Free cash flow conversion above 19% of revenue, funding $800+ million in annual share repurchases.
• No material competitive disruption from vertical integration by large customers or capacity expansion by peers.

The bull story is credible. Howmet has a multi-year backlog, strong segment growth, expanding margins, and a genuine moat in a supply-constrained industry. The SpaceX scare was a misread.

But credibility is not the same as margin of safety. At a forward P/E of 61, the stock is not cheap even if the bull story plays out exactly as modeled. It is expensive because the bull story is exactly as modeled — and markets price the consensus, not the upside above it.

The ruling

The business case goes to the bull. The stock call goes to the bear at this price.

Howmet Aerospace is a high-quality company navigating a genuine supply bottleneck in aerospace casting. The SpaceX turbine blade announcement was not a competitive threat — it was a customer solving its own captive power problem, and the subsequent GE Aerospace acquisition of a casting specialist for $11.75 billion validates the scarcity Howmet profits from.

But the stock at $228 — roughly 61 times forward earnings, 34 times EV/EBITDA, and 52 times free cash flow — has already rewarded the bull story. The 21% decline from August highs is a pullback within a premium valuation, not a margin of safety. If growth decelerates from its current pace, even modestly, the multiple compression that follows could erase the pullback in days.

The burden of proof is on the bull. The business must deliver the compounding earnings growth already implied by the price, and the gas turbine tailwind must persist longer than the market's patience for disappointment.

The ruling reverses if: Howmet's Q3 2026 results (expected in early November) show gas turbine segment growth holding above 25% year over year and management's first commentary on 2027 revenue reaffirms multi-year growth above 15%. That would demonstrate the tailwind has legs, supporting the premium.

The bear's earliest confirmation would be: Q3 gas turbine growth falling below 15% or management guidance that implies gas turbine demand is normalizing faster than consensus models assume. At current multiples, that single data point is enough to justify further downside.