Not Starlink. Not Starship. This Is the Real Reason SpaceX Stock Could Soar Before 2027 Arrives.

Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, has had an interesting year on the public markets. While its stock price spiked at its public market debut to more than $200 per share, it promptly crashed to nearly $100 per share. Now, it trades around $140 per share, which is slightly less than the price at which investors first bought shares on its IPO day.

However, I think now could be a smart time to buy. Why? It's all about a business that not many investors appreciated (including myself) during its IPO.

While its Starlink business got a lot of headlines for being profitable and growing quickly, and Starship Technologies is cool, what will really drive the stock is its AI business. If the market flips its stance on AI investing, the stock could soar, and investors must be prepared.

Image source: The Motley Fool.

How fast is its AI business growing?

SpaceX acquired xAI shortly before going public. xAI operates its own AI lab, which makes the Grok family of large language models. It also owns X, formerly known as Twitter, but that's just a minor subset of the business.

Just like other AI firms, SpaceX has seen its revenue explode as many clients adopt AI models and agents for a growing number of tasks. While it may seem like AI is doing a lot right now, we're just at a starting point for full-on AI adoption. That means there could be huge growth ahead, and SpaceX is counting on it.

The company is already seeing unbelievable revenue growth, as Super Intelligence (SI, SpaceX's AI division's official name) grew at a breathtaking 830% year-over-year pace to $7.56 billion. With SpaceX generating $14.6 billion in total revenue during Q3, xAI now accounts for over half of the business's revenue. So, you could make the case that this is really an AI company with space aspirations, although that's not the direction the company is heading over the long term.

SPCX Revenue (TTM) data by YCharts

CEO Elon Musk sees huge potential in AI, so he's pivoting the company there in the short term to build a larger business that can help fuel the space exploration side of the business when the time is right. Musk is very bullish on the prospects of the AI business, and he believes that by the end of 2027, annual recurring revenue could reach between $500 billion and $1 trillion.

Now, anyone who has followed Musk's projections knows that he sets massive long-term targets that are rarely reached. However, he's normally right about the direction that industry is headed, so hitting this level in a couple of years may not be out of the question.

However, Musk wouldn't be making this projection if he didn't see huge growth in the near future, and that could be all the stock needs to rise before 2027 arrives.

What will the market do?

There isn't really a debate about how fast SpaceX's AI business is growing. Rather, the debate is about how much companies should spend. With the market bearish on several AI firms due to heavy spending, the answer is pretty clear: They're spending too much right now. As a result, AI-related stocks aren't doing well.

If that trend persists to the end of 2026 and throughout 2027, SpaceX's stock could struggle. However, if that flips, SpaceX is one of the best ways to invest in the AI build-out.

I think the market will flip its stance soon, and that could lead to a huge rally by the end of the year. But even if it doesn't, SpaceX is increasingly looking like a great long-term investment due to the strength of its AI business.

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.