SpaceX Stock Is Sliding. Should You Buy the Dip?

Space Exploration Technologies' (NASDAQ: SPCX) market debut may have been one of the most exciting investing events of the year. For a few reasons. First, it involved a company pursuing three innovative businesses: space, satellite connectivity, and artificial intelligence (AI). Second, Elon Musk, known for his aggressive push into challenging but potentially lucrative fields, leads the company.

Finally, and perhaps the most compelling reason of all, SpaceX launched the biggest initial public offering on record, raising more than $85 billion after the exercise of an overallotment option, and entered the market with a trillion-dollar valuation. Its market value immediately put it on par with market giants such as Nvidia and Amazon -- companies that took years to reach such levels.

Though SpaceX stock took off in its first days of trading, its path since hasn't been as positive. Today, the stock is down about 3% from its opening price of $150 and down 14% from its IPO price of $135. Should you buy on the dip? Let's find out.

Image source: Getty Images.

SpaceX says Starship flights put it on track to full reusability

First, as mentioned, SpaceX has attracted considerable attention for its innovative businesses. The company operates a space unit, which has a goal of reducing launch costs through the use of reusable rockets. And it's made significant progress here. During SpaceX's earnings report in August, it said its two completed Starship V3 flight tests put it on track toward "full and rapid reusability."

Now, SpaceX aims to launch Starship on its 14th flight on Sept. 28, and it will be the first Starship flight to orbit around Earth. The mission also will benefit SpaceX's connectivity business, known as Starlink, as the spacecraft will deliver Starlink V3 satellites to supercharge connectivity speeds and reliability.

What's interesting about SpaceX, as we can see here, is that the space business may significantly contribute to the successes of Starlink and the AI business as well -- a goal of the AI unit is to establish data centers in space, and we could imagine Starship being an integral part of the plan. All of this would lower costs for SpaceX and favor efficiency as the company wouldn't have to rely on other companies for many key tasks.

SpaceX AI's capex exceeds total revenue

This is positive and certainly sparks the interest of investors looking for growth. But it's important to keep in mind that these businesses, particularly AI, require a huge amount of investment. For example, in the recent quarter alone, the AI business' capital expenditures totaled $15 billion -- that's up from $7 billion in the previous quarter and about $700 million in the year-earlier period. In the quarter, the AI business brought in $2 billion in revenue, and the company as a whole generated $7.8 billion in revenue. At the same time, due to this investment in growth, SpaceX's loss has deepened.

And it's also important to keep in mind that this focus on innovation is great, but it equals risk. This is because, to reach its biggest goals, SpaceX relies on technology that hasn't yet been fully proven. So, if the technology works as expected, the win could be colossal, but if it doesn't, the loss could be significant.

Now, let's get back to our question: Considering this complete picture, is SpaceX a buy on the dip right now? The answer has a lot to do with your investment strategy and comfort with risk. If you're an aggressive growth investor, you might consider picking up shares of SpaceX and holding on -- certain accomplishments, such as successful space launches and progress in reusable technology, could periodically spur gains. Also, a generally positive market environment may boost appetite for growth stocks such as SpaceX.

But, if you're a cautious or even middle-of-the-road investor, it still may be a bit too early to get in on this tech and industrial giant. Before diving in, I would look for at least another couple of quarters of earnings reports to see whether spending levels spur further growth, particularly in the AI business.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.