Only a few companies make the crucial components for power turbines that AI data centers are so desperate to get. Elon Musk wants to go ahead and make his own. That has unnerved investors in this prized oligopoly.

Over the weekend, Musk confirmed on X that SpaceX will start making the blades and vanes that go into natural-gas-fired power turbines. "By doing in-house casting at SpaceX, we can accelerate nat gas turbines coming online by up to 18 months, which is a profound game-changer," he wrote in his post, responding to a report from the Information.

In mid-August, Morgan Stanley published a report saying that SpaceX was planning such a foundry in Bastrop, Texas, based on the company's job postings.

Shares of Howmet Aerospace fell more than 7% Monday, before partially rebounding on Tuesday. Howmet and Berkshire Hathaway's Precision Castparts are the two biggest players in the market for these parts, which also include blades and vanes for the aerospace and defense sectors. Smaller player DPC's shares were also hit.

It is premature to count SpaceX as a threat. But shares of Howmet Aerospace and DPC might have been due for a breather: They are among the priciest artificial-intelligence picks-and-shovels plays at 42 times and 45 times forward earnings, respectively. Turbine makers GE Vernova and Caterpillar fetch 33 times and 26 times earnings.

DPC is the most vulnerable to disruption in this space. It is small, and about 40% of revenue comes from natural gas-fired turbines. While Howmet holds about half the global market share of components used in natural-gas turbines, it is diversified across aerospace and defense, with only 11% of revenue coming from gas turbines.

SpaceX will face barriers to entry. One reason there are so few companies in this sector is that it is technically challenging to make the blades, which must withstand extreme temperatures and rapid rotations.

The casting process involves making a new wax mold from scratch each time. Making these parts requires the blade to be "grown" in a vacuum furnace as a single crystal of nickel superalloy, according to Nigel Chiang, an analyst at SemiAnalysis. Even a stray grain or hairline defect means the part has to be scrapped, he added. A new manufacturing line could scrap over half its production for a long period.

It is also a highly secretive process. Once the parts are produced, the ceramic cores and wax used to make them are destroyed, Howmet's Chief Executive John Plant said at an investor meeting earlier this year. That prevents competitors from reverse-engineering them.

A high scrap rate might matter less if SpaceX is making parts for its own use. Morgan Stanley's report noted that "we would not expect SpaceX to be a material supplier of blades and vanes for supply outside of SpaceX use." Given the enormous stresses that shifting AI power loads can have on power turbines, it might be handy for xAI's data centers to have an internal supply of replacement parts.

SpaceX is no stranger to engine technology; it designs and manufactures a "significant portion" of its components in-house. These include rocket engines and avionics, according to its intial public offering filing.

SpaceX's planned foundry would make single-crystal nickel superalloy parts for the turbopumps in its Raptor rocket engines and the power turbines, according to the Morgan Stanley report. It is unclear if SpaceX currently casts its own blades for the Raptor turbopumps, according to the report.

Even so, sector analysts estimate a brand-new factory would take four years at a minimum, which is a long time in the AI world. Specialized vacuum furnaces required to make these parts have lead times of more than two years, according to Chiang.

Hiring and training people will take time, too. Critical positions require six months to a year of training, according to DPC, where the average tenure of technical workers-such as engineers and metallurgists-is 9.5 years.

If anything, Musk's foundry plan highlights just how critical these blades and vanes are to the AI build-out. The recent share-price pullback is a chance for investors to think about what they are willing to pay for this market power. But it doesn't dim the investment case for Howmet Aerospace and DPC.