Buy the SpaceX IPO -- or Wait for Anthropic and OpenAI? The Answer May Surprise You.

For years, cutting-edge technology companies emerging from places like Silicon Valley have remained private, creating a barrier to individual investment. That wall is quickly coming down. SpaceX is going public in a record IPO, and now two other gigantic start-ups are vying to be next: Anthropic and OpenAI.

The two leading artificial intelligence (AI) companies have begun filing paperwork to go public this year, with expectations of raising hundreds of billions of dollars from investors. In all likelihood, all three of these stocks will have market values above $1 trillion.

But which is the better buy? No matter the price, the answer is clear for investors.

SpaceX's growth potential

SpaceX has been covered ad nauseam in recent weeks. The $18 billion revenue company is going public by raising $75 billion to fund its ambitions for its new Starship rocket, orbital data centers, and Starlink internet.

Starlink revenue is growing 50% year over year, and new AI contracts with customers like Alphabet and competitor Anthropic could drive massive revenue growth in the years ahead. It wouldn't be surprising if this $18 billion in revenue grows to $100 billion within just a few years.

That still puts its valuation at a premium compared to the $1.77 trillion IPO price. Plus, manufacturing and launching objects into orbit is not cheap, meaning SpaceX is likely to have slim profit margins even as it gets to greater scale.

Image source: Getty Images.

OpenAI and Anthropic's exponential curve

OpenAI and Anthropic are much younger businesses than SpaceX, but they are already at large revenue run rates. These are the two AI companies behind ChatGPT (OpenAI) and Claude (Anthropic), whose tools have taken the business and consumer worlds by storm in the last four years.

Revenue at both is growing exponentially. OpenAI's annualized revenue was up to $25 billion earlier this year, while Anthropic's is expected to grow to $10.9 billion in the second quarter alone, or a run rate of $50 billion. We do not have the exact details on their financials, but this exponential growth has created a fervor for private market investments.

Both companies have market values at just under $1 trillion. If this revenue growth continues, OpenAI and Anthropic should be able to IPO at market caps above $1 trillion later this year. To be fair, we have no idea what the audited financials look like, but this is not something investors are focused on right now. They only care about growth.

Which IPO is the best buy?

It is difficult to build a thesis around buying SpaceX at a market cap of $1.77 trillion, or a price-to-sales ratio (P/S) of 93. There are major engineering problems to solve to make Elon Musk's vision a reality, and even if it does, it will take many years. No one buys a stock expecting it to fall in the next five years. But with SpaceX, that is the exact scenario getting set up with this gargantuan IPO valuation.

OpenAI and Anthropic are mysteries, and we do not know what prices they will IPO at. But assuming a similar market cap to SpaceX, they are both likely to disappoint investors in the years ahead. Most IPO stocks underperform the market, especially when they debut at high P/S ratios.

The AI revolution is upon us, but it is a highly uncertain field, with many competitors vying for the thrones of OpenAI and Anthropic. This industry didn't even exist five years ago, so it is hard to predict what these two businesses will look like five years from now.

For these reasons, I think investors should avoid all three mega-IPOs this year.

Brett Schafer 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.