SpaceX vs. Alphabet: Which Is the Best Artificial Intelligence (AI) Stock to Buy Now?

While investors may think of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) as an artificial intelligence (AI) stock, Space Exploration Technologies (NASDAQ: SPCX) could also be considered one as well. SpaceX has a quickly growing AI business that puts some of the growth rates Alphabet is delivering to shame, and could easily make a case as a better AI stock.

But is SpaceX a better buy than Alphabet right now? Let's take a look.

Image source: Getty Images.

SpaceX's AI business is booming

Prior to going public, SpaceX acquired xAI. xAI makes the Grok large language model and also owns X, formerly known as Twitter. This gives SpaceX exposure to the most important technological trend seen in a long time: AI. Grok is a widely used AI model and is rising in usage, as displayed by its growth rates.

During the second quarter last year, xAI generated $818 million in revenue. This Q2, it produced $2.56 billion -- a 213% growth rate. That's a booming business, and outpaces anything that Alphabet produced during Q2.

But does that make SpaceX the better AI stock?

Alphabet has a different segment of AI

Alphabet also develops several large language models to compete against xAI's, but how those are accounted for in Alphabet's financials is not as clear as SpaceX's. So, Alphabet may have a segment growing just as fast that's buried inside one of its other divisions. However, one segment that's front and center is its cloud computing business, Google Cloud.

Cloud computing is thriving, as several AI firms would rather rent computing power than build it themselves. Furthermore, the number of applications that utilize AI is rising, and there is a huge need for computing bandwidth. As a result, cloud computing is in huge demand, and Alphabet is benefiting.

During Q2, Google Cloud's revenue increased by 82% year over year to $24.8 billion. For reference, SpaceX as a whole generated $7.8 billion in revenue during the same period. So, by itself, Google Cloud is three times larger than SpaceX. SpaceX wasn't profitable in the quarter, and posted a $143 million loss from operations. Google Cloud produced an $8.8 billion operating profit.

Google Cloud is a better business by itself than SpaceX, and with Alphabet benefiting from a massive AI buildout going on, its growth rate isn't likely to slow down.

Right now, the scales are tipping in Alphabet's favor, but is the stock valued at a reasonable level?

SpaceX is a very expensive stock

Because we don't have a year's worth of results available for SpaceX, investors need to use analyst projections to value the stock. For 2026, they expect an average of $44.6 billion in revenue. That values SpaceX at about 41 times sales.

For comparison, Alphabet has never traded for more than 10 times sales for nearly the past two decades. Right after it first went public, it got to nearly 25 times sales, but that was also when Alphabet was growing faster, too.

GOOGL PS Ratio data by YCharts

I think the 40 times sales price tag on SpaceX is just too steep, and with Alphabet also having great AI offerings and business units that will thrive from increased AI spending, it makes it an impressive AI stock to consider. While I'm not writing off SpaceX from being a major winner of the AI arms race, Alphabet is in a better position to benefit from both a business and stock perspective.

Alphabet is a great buy at today's levels, and with huge growth expected from its cloud computing division over the next few years, it's one of the best AI stocks to buy now.

Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.