SpaceX vs Nvidia: Which Stock Will Be Worth More in 5 Years?

Nvidia (NASDAQ: NVDA) remains the top company in the world, with a market cap of around $5 trillion. This year, however, there has been a bit less excitement around the business, particularly as new growth stocks have taken center stage, including Space Exploration Technologies Corp (NASDAQ: SPCX), better known as just SpaceX.

Right now, there's still a fairly large delta between their two valuations. But with Nvidia facing an uptick in competition in the chipmaking business, and with SpaceX eyeing some incredibly huge growth opportunities, the gap could shrink in the future. Will Nvidia still be the more highly valued company in five years, or could SpaceX end up overtaking it?

Image source: Getty Images.

Is Nvidia's stock due for more of a slowdown?

Nvidia has been a red-hot stock to own in recent years due to the incredible demand for artificial intelligence (AI) chips, a market that it dominates. Its sales and profits have been soaring, which has enabled it to continue trading at a fairly modest valuation, despite the stock's massive returns. Paying 32 times earnings for a business that's growing at a rate of 85% (in its most recent quarter) doesn't seem like a bad deal at all.

However, this year, the stock is up around 11% thus far. Investors appear to be less excited about the business, perhaps because its market cap is as high as it is and because of worries that a growing number of tech companies are making their own chips, which would lessen demand. Plus, if spending slows down in the broader tech sector, due to concerns about the payoff from AI investments, there could be multiple factors weighing on its future growth rate.

It certainly wouldn't be unreasonable to expect Nvidia's stock to generate more modest returns in the near term. And under a worst-case scenario where its growth rate falls significantly, it may even be due for a steep correction.

Could SpaceX stock take off?

SpaceX stock started hot when it began trading last month, but things have cooled off significantly of late, with investors thinking twice about its valuation. It does, after all, trade more on its future expectations rather than its results -- the company is deeply unprofitable, with its net loss during the first three months of the year totaling $4.3 billion, on revenue of $4.7 billion.

But Elon Musk's high hopes for the business, including not only AI-related growth but also the possibility of helping send humans to Mars, could enable the stock's valuation to reach new heights, even if profitability may not be around the corner. Investors already showed a strong willingness to pay a high price for the stock when it began trading, and if it's showing signs of progress toward reaching its goals, that may be the confirmation that growth investors need to believe that it's on the right track and worthy of an even higher price tag.

Some analysts project that in five years, the stock could be generating an incredible $565 billion in sales. Surely, if it gets to those heights, that might be proof that it's doing exceptionally well, and its valuation may be much higher.

Nvidia's returns may be more modest, but it's likely to remain far more valuable than SpaceX

Even though Nvidia's stock may not soar over the next five years, certainly not to the extent that it has over the past five years, I don't think it's likely that SpaceX will become more valuable. The most valuable companies in the world today are those that are also highly profitable. While speculation and hype have enabled SpaceX to command a valuation of around $2 trillion, cracks and doubts have already appeared, with the stock struggling in recent weeks. And this could still be the early innings of a much wider decline to come.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.