SpaceX Stock Soared 19% on Its Market Debut. Here's Why I'm Not Buying It.

SpaceX (NASDAQ: SPCX) went public on Friday, June 12, and ended the day with a 19% gain. The company had a market capitalization of $2.1 trillion at the close of trading, making it the world's seventh-most-valuable company.

While SpaceX is best known for developing the world's first reusable rockets, management believes space-related solutions actually represent its smallest financial opportunity in the long run. Instead, the company could make most of its money by selling connectivity and artificial intelligence (AI) solutions, and it's already having commercial success on both fronts.

That said, SpaceX is still generating very little revenue relative to its enormous market capitalization, which I think creates an uncomfortable risk-versus-reward situation for investors. Here's why I'm not buying the stock.

Image source: The Motley Fool.

Here's what SpaceX does

SpaceX divides its business into three core segments:

1. Space: The company uses its Falcon 9, Falcon Heavy, and Starship rockets to launch satellites and other commercial payloads into orbit on behalf of businesses and governments.
2. Connectivity: The company has more than 9,600 Starlink satellites in orbit, which provide internet access to more than 10.3 million paying subscribers on Earth.
3. Artificial intelligence: SpaceX acquired Elon Musk's xAI start-up in February. The joint companies operate enormous data centers that they use to train AI models such as Grok, but they also rent spare computing capacity to other companies, including Anthropic and Alphabet.

SpaceX values its addressable market in the space segment at $370 billion, whereas the connectivity business presents a $1.6 trillion opportunity. But the AI business dwarfs both, with a potential market size of $26.5 trillion.

SpaceX is already responsible for more than 80% of the world's mass to orbit in the space business, meaning it's launching more commercial payloads than any other company or government, and it isn't even close. This market share will only grow as Starship is used more frequently, because it has a payload capacity of 100 metric tons, more than four times the capacity of Falcon 9.

On the connectivity side, there's SpaceX with its fleet of satellites. The company will start launching its V3 satellites later this year, which will offer more than 10 times the bandwidth of the current V2 generation. Plus, Starship will launch up to 60 V3 satellites into orbit at a time, whereas Falcon 9 has a capacity of just 27.

Finally, the AI business currently draws most of its revenue from Grok subscriptions and from renting spare data center capacity to other companies. When SpaceX bought xAI, it acquired data centers, including Colossus and Colossus II, which house hundreds of thousands of graphics processing units (GPUs) from suppliers including Nvidia.

In the future, SpaceX believes it can host AI computing clusters in space, where they can run on solar power with no need for complex liquid cooling systems, which waste a lot of water. Data would be beamed back to Earth via Starlink satellites, giving SpaceX a huge competitive advantage over every other AI infrastructure company.

Rapid revenue growth, but a sky-high valuation

SpaceX generated $18.7 billion in total revenue during 2025, up 33% from the previous year. Here's how it was broken down:

Data source: SpaceX.

Connectivity was not only the largest but also the fastest-growing business last year. But that could soon change, because SpaceX has an active deal to rent $1.25 billion worth of computing capacity per month to Anthropic, and another deal to rent $920 million worth of capacity per month to Alphabet starting in October. In other words, the AI business could soon have $26 billion in annualized revenue from two customers alone.

As a result, Wall Street thinks SpaceX could generate as much as $64.5 billion in total revenue during 2027 (according to Yahoo! Finance), more than triple its 2025 result. While that sounds promising, it would still give SpaceX stock a sky-high forward price-to-sales (P/S) ratio of 32.5.

For context, the Nasdaq-100 technology index trades at a P/S ratio of 6.8 today, which is near a record high. That suggests SpaceX might be heavily overvalued relative to a basket of its big-tech peers.

As a result, while the SpaceX story is certainly positive, its valuation assumes perfect execution. Even if the company meets Wall Street's lofty 2027 revenue forecast, its stock would still be relatively expensive, which could limit further upside. If the company generates less revenue than expected next year, the stock could suffer a sharp correction. That doesn't sound like an attractive risk-versus-reward proposition, so I'm not a buyer right now.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.