2 Reasons Not to Invest in SpaceX -- and What to Buy Instead

Space Exploration Technologies (NASDAQ: SPCX) might be the hottest stock on Wall Street right now. It completed the largest IPO in history about two weeks ago and even briefly became the fifth-largest corporation on the market. Many investors are excited about SpaceX's outlook, given its aggressive vision for a multiplanetary future, as well as its work in broadband internet services and artificial intelligence, the latter of which represents the largest addressable market worth tens of trillions of dollars, according to the company. However, there are good reasons to be skeptical of SpaceX right now. Let's discuss two of them and consider an alternative investment strategy.

Image source: The Motley Fool.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

1. The valuation is hard to justify

SpaceX's stock has declined over the past few days, but the company is still worth about $2 trillion. It's not too hard to understand why: If SpaceX can make significant headway into its addressable opportunities -- and is actually right about the size of the markets it is tapping into -- it could deliver impressive returns. The only problem is that, for now, SpaceX's financial results hardly justify its market value. In 2025, the company posted revenue of $18.7 billion, up 33% year over year. It also recorded a net loss of $4.9 billion, far worse than the $791 million in net income it reported in 2024. SpaceX significantly trails other tech leaders with a market cap of $2 trillion or more in both categories.

NVDA Revenue (Annual) data by YCharts

Further, some of them are also tapping into the massive AI market SpaceX is targeting, so it's not like the company will have an unobstructed path to the top of this industry. In short, even if SpaceX's ventures look somewhat promising, at its current levels, it could be a wealth destroyer -- rather than a wealth compounder -- over the next few years.

2. It is exposed to significant political risk

SpaceX does a lot of business with the U.S. federal government, which accounted for about 20% of the company's revenue last year. On the one hand, that grants the company a predictable source of revenue. However, it also creates potential problems for SpaceX. New administrations can shift priorities and reduce budgets typically dedicated to space travel, which would harm the company's business. This risk is especially pronounced considering Elon Musk, a rather divisive political figure, is the CEO of SpaceX. The company is benefiting from government contracts now, but that could change quickly, which is another reason to be skeptical of SpaceX's prospects.

Here's what to buy instead

There are safer ways to invest in the space economy than buying shares of SpaceX. For instance, it's worth considering the Procure Space ETF or the Tema Space Innovators ETF, both of which provide exposure to leading companies in the space industry, including SpaceX. So, these ETFs can help investors capitalize on the growing space industry while reducing the significant risk associated with SpaceX.

Prosper Junior Bakiny has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.