Key Points
Space Exploration Technologies (NASDAQ: SPCX) — commonly known as SpaceX –is a highly controversial space stock.
Some experts believe the company will transform multiple industries, leading to hefty gains for long-term shareholders. Other experts, like Jeremy Grantham, the co-founder of GMO LLC, strongly believe SpaceX will “fail to deliver anything like its promises in the prospectus.”
SpaceX’s growth ambitions hinge on its ability to scale not only its rocket and satellite launches but also its fledgling AI business. More than 90% of the company’s claimed growth potential outlined in its IPO prospectus deals exclusively with AI opportunities.
Can AI growth justify SpaceX’s current $2 trillion valuation? At least one major investment bank thinks so.
Here’s how AI growth can help SpaceX’s stock price soar
I expect SpaceX to use the majority of its IPO proceeds, as well as the $25 billion raised in a follow-on bond offering, to invest heavily in scaling its AI business. That means building more compute infrastructure, chip manufacturing facilities, and orbital data centers.
How big will SpaceX’s AI business get long-term? Goldman Sachs recently revealed its expectation for SpaceX’s AI division to grow its revenue 100-fold by 2030. Admittedly, SpaceX’s AI revenues totaled only $3.2 billion last year. But hitting $322 billion in sales by 2030 would be quite an impressive feat.
Goldman Sachs was one of the underwriters of SpaceX’s IPO. So it’s not surprising to see the bank issue an optimistic forecast. But if Goldman Sachs’ prediction comes true, just how high could SpaceX’s stock price soar?
It’s difficult to know just how the market will value a scaled AI business like SpaceX’s. But Nvidia‘s (NASDAQ: NVDA) valuation of 19.7 times sales gives us at least a window into what’s possible. At that valuation, SpaceX would be worth somewhere around $6.3 trillion. A $500,000 investment today, therefore, would end up being worth around $1.6 million by 2030.
The math likely won’t work out as cleanly as demonstrated, however. SpaceX remains a money-losing business, a reality that will likely force it to issue more stock in the coming months and years. Plus, there’s no guarantee that the market will price SpaceX stock the way it does Nvidia stock today. There are clear differences between the businesses, and some investors worry that we’re in the midst of an AI bubble, which may be overinflating the valuations of AI stocks.
Still, if Goldman Sachs’ prediction comes true, it’s not hard to justify SpaceX’s current valuation of $2 trillion. Just remember that there will be plenty of execution, financing, and timing risks involved.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
