SpaceX or Rocket Lab: Which Space Stock Is the Better Buy for the Next Decade?

The future of the space economy will play out in public markets. Space Exploration Technologies (NASDAQ: SPCX) went public with a bang back in June and is now valued as one of the world's top stocks by market cap. Investors are highly optimistic about the future of the space economy and what it could mean for satellite internet, artificial intelligence (AI), and other space applications in the 21st century.

But there is another stock competing with SpaceX that has already delivered over 500% gains for shareholders since going public five years ago: Rocket Lab (NASDAQ: RKLB). Which stock will be the better buy for your portfolio over the next decade?

SpaceX's market share and AI ambitions

Many readers know about SpaceX and its founder, Elon Musk. Musk has set SpaceX on an ambitious plan to win in the space economy with multiple technologies.

First, of course, it launches payloads into orbit. Today it uses the workhorse Falcon 9 rocket, but in the future, it hopes to use the much larger Starship, which is currently under testing. This segment generates less than $1 billion in quarterly revenue but is the engine that keeps everything else moving.

Second, SpaceX is using its own launch program to send thousands of satellites into orbit to create a global high-speed internet service called Starlink. This division is doing wonderfully at the moment, with revenue up to $4.3 billion last quarter and $1.66 billion in income from operations. Revenue growth was 66% compared to the same quater last year. With a huge telecommunications market, SpaceX believes there is an addressable market of over $100 billion for satellite internet services globally. With strong margins, this could be a nice growth driver for SpaceX in the years ahead.

Lastly, SpaceX's long-term ambition is to build an AI data center business on earth and in orbit. It will require significant upfront investment and innovation to make data center technology in orbit possible, but Musk believes this can deliver rapid revenue growth for the SpaceX AI segment, helping the business reach $1 trillion in revenue by 2030. It generated only $21 billion in total revenue over the last 12 months, making this $1 trillion goal unlikely to be achieved.

Image source: Getty Images.

Rocket Lab's rapid growth

Rocket Lab is in an earlier stage than SpaceX in space applications, but it has begun nipping at SpaceX's heels.

It is in the process of acquiring Iridium Communications for approximately $8 billion. Iridium has an existing satellite internet business that will help Rocket Lab springboard its own ambitions for space applications, competing more directly with SpaceX.

Importantly, Rocket Lab has an innovative new rocket under testing called the Neutron, which should be able to compete more directly with the Falcon 9 for large-payload missions, including Rocket Lab's own space service projects.

These two developments -- as long as they are executed correctly -- should lead to sustained revenue growth for Rocket Lab, which has already seen overall sales hit $769 million over the last 12 months, up 1,400% in the last five years. Similar growth over the next five years would bring Rocket Lab's revenue to over $10 billion.

Which stock is a better buy?

When it comes to analyzing which stock is a better buy, the differentiator may come down to valuation and size.

SpaceX trades at a market cap of $2 trillion and a trailing price-to-sales ratio (P/S) of 91. This is placing massive growth expectations on the business if the share price is to deliver gains for shareholders in the years ahead. Conversely, Rocket Lab trades at a small market cap of $38 billion and a P/S ratio of 48, even though it is much smaller than SpaceX.

Unless you are uber-bullish on SpaceX, Rocket Lab stock might be a better bet right now if you are clamoring for some exposure to space economy stocks.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.