Space Exploration Technologies (NASDAQ:SPCX) is the blue-chip stock to bet on the future of the space economy. With the promise of satellite connectivity and orbital data centers, Elon Musk’s space company really does feel not only exciting but like the missing piece to a growth portfolio that seeks to cover all bases in this AI revolution.
Whether the next growth frontier beyond AI lies in space remains the big question, but, in any case, SpaceX stands out as the play for investors who are willing to pay that premium price of admission. After a surge past $211 per share, shares of Space Exploration Technologies have pretty much taken a round trip back to levels where it spent most of its very first day of trading, at around $160 per share.
With limited float and a sky-high valuation that implies a market cap of more than $2.1 trillion, perhaps it’s best to wait around for more shares to hit the market as the valuation looks to settle in a range that doesn’t bake in so much going right.
SpaceX’s expensive, and it might not be immune to CapEx fears
It’s a steep valuation, to say the least, and while there’s definitely disruptive potential there, especially when it comes to Starlink and its ability to take market share away from the telecom incumbents, I still think that it will become just a bit tougher to justify paying up for Elon Musk’s space titan, especially if investors really start expressing their distaste for AI-related CapEx.
In prior pieces, I expressed my concern about a potential CapEx reality check, especially given the pace at which data centers are going up.
For now, investors seem quite pleased that SpaceX is making big money selling AI compute to others. But as the firm builds infrastructure to meet its own needs, questions linger as to whether investors will believe in Mr. Musk’s vision or if SpaceX will experience a similar CapEx hangover as the Mag Seven hyperscalers have.
In many ways, SpaceX is a big bet on AI following the merger with xAI. And, as you’re probably aware, it costs a lot to play and even more to move to the front of the pack with the likes of the frontier-level innovators. For Mr. Musk, who plays the win, I think CapEx could have the potential to be significant.
Rocket Lab looks enticing after a dip
Either way, for investors willing to wait for SpaceX shares to come in a bit, I think it makes sense to consider some of the other space plays out there, even though SpaceX dwarfs the market caps of its rivals combined.
In my view, I think names like Rocket Lab (NASDAQ:RKLB | RKLB Price Prediction) are also worth keeping tabs on for investors looking for a more diversified space portfolio. Specifically, for investors looking to play the space hardware and commercial launch service side of the business with less emphasis on AI, data centers, and, of course, exposure to fabs and chips, I think Rocket Lab could make for a great supplement to a SpaceX position, especially while it’s down around 33% from its highs.
Who knows how many SpaceX shareholders sold off the name in the weeks leading up to the SpaceX IPO? Either way, the “sell the proxy” rotation might be exhausted, opening a window of opportunity for investors seeking launch exposure beyond Elon Musk’s much-hyped firm.
Of course, there isn’t quite a replacement for SpaceX, a mega-cap AI-space titan that I do think investors should seek exposure to, perhaps after the valuation comes in (a $1.25 trillion market cap makes more sense, in my view). In the meantime, investors in the Nasdaq 100 may already have more than enough exposure to the giant as Mr. Musk looks to execute on his grand vision.
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