In June, Elon Musk’s space industrial giant, SpaceX (NASDAQ: SPCX), broke records with an initial public offering (IPO) that valued it at $1.77 trillion. This was the largest corporate debut in history, and it netted SpaceX $75 billion in capital that will be used to accelerate its burgeoning artificial intelligence (AI) and satellite internet businesses.
But SpaceX’s blockbuster IPO is a double-edged sword. The larger a company is, the harder it is for management to move the needle and deliver impressive stock returns. Let’s dig into the pros and cons of SpaceX to decide what the shares might be worth by the end of 2027.
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A private-sector NASA?
When people thought about space exploration a few decades ago, they were almost exclusively envisioning large state-owned entities like the U.S. National Aeronautics and Space Administration (NASA). SpaceX has helped to change this narrative, achieving milestones like becoming the first private company to return a rocket from low Earth orbit and the first to send astronauts to the International Space Station (in 2020).
As a profit-driven entity, SpaceX offers key advantages over the old government-led model of space exploration. For starters, it has a huge incentive to boost efficiency and reduce costs, which leads to innovation (especially in things like rocket size and reusability). SpaceX has also unlocked impressive levels of vertical integration.
SpaceX’s different segments simply mesh well together. The launch services business provides a reliable platform for its Starlink broadband internet service to transport large numbers of satellites to space more cost-effectively than rivals. On the flip side, this also boosts cargo capacity utilization on its vessels to improve economies of scale.
SpaceX is also attempting to control as much of its supply chain as possible by manufacturing everything from its own rocket components to satellites, power infrastructure, and computer chips.
Business is booming
While SpaceX’s huge market cap of $1.9 trillion may make it look like a mature company, second-quarter earnings suggest there is still plenty of room for growth. Revenue rose 92% year-over-year to $7.8 billion. And while the strong showing was driven by strength across all the company’s business segments, AI stood out with a jump of 213% to $2.56 billion.
SpaceX’s AI business is largely comprised of assets acquired through its combination with xAI, another Musk-controlled company known for its ownership of the X.com social media platform, the Grok large language model (LLM), and stockpiles of advanced compute hardware.
Image source: Getty Images.
SpaceX’s Grok has fallen behind the industry-leading LLM providers like Anthropic and OpenAI in terms of enterprise and consumer adoption. But the company has shifted its strategy to serve the potentially more lucrative infrastructure side of the AI industry by renting out computing power to its former rivals. This includes high-profile deals with Google and Anthropic, which will pay SpaceX a whopping $920 million and $1.25 billion per month, respectively, for access to its AI infrastructure.
Over the longer term, SpaceX plans to better integrate its AI business with its existing space business through space-based data centers. Musk believes this technology could eventually become an ideal way to handle AI workloads because of its access to virtually limitless solar energy and easier cooling. All this remains highly speculative. But if it works, it could boost SpaceX’s vertical integration and create a huge economic moat against other data center companies.
What would SpaceX’s stock price be by the end of 2027?
As time goes on, SpaceX’s stock is starting to look more and more attractive. But with a price-to-sales (P/S) multiple of 68, it is still too expensive for comfort — especially for investors who fear the generative AI boom might be a bubble. With this in mind, the shares will probably remain around their current level by the end of 2027. And investors should continue waiting on the sidelines until more information becomes available.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
