Here's What $10,000 Invested in SpaceX Stock Could Look Like in 5 Years

Space Exploration Technologies Corp (NASDAQ: SPCX) may be known for launching rockets, but it's grown into something much bigger. The company, which still dominates the commercial launch market, operates a fast-growing satellite internet business -- Starlink -- and is a major provider of artificial intelligence (AI) computing power.

That gives investors plenty to be excited about. And it also makes SpaceX unusually difficult to value. Its businesses have enormous potential, but they require equally enormous investments, and several are still losing money.

So, where could SpaceX stock be five years from now? What would $10,000 invested today look like in 2031?

SpaceX by the numbers

Let's start with what the company actually looks like today. In the second quarter, SpaceX brought in $7.8 billion in revenue, up 92% year over year, while narrowing its operating loss to just $143 million. Its net loss came in at $541 million.

The company's Connectivity segment generated $4.3 billion in revenue, up 66% year over year, and posted a healthy operating profit of $1.65 billion, up 79%.

But those numbers present a somewhat rosier picture than the underlying economics. When SpaceX launches its own Starlink satellites, the rocket business doesn't book any revenue for those launches. Instead, the costs are carried on the balance sheet by the Connectivity segment and depreciated over time.

Image source: Getty Images.

That makes the Space segment look considerably worse on paper. It brought in just $962 million in revenue during the quarter and posted a $542 million operating loss. If SpaceX charged Starlink market rates for those launches, the Space segment's results would look much better. Of course, the trade-off is that Starlink wouldn't look quite as much like the financial unicorn many investors see it as.

AI contracts have changed the picture

The AI segment has seen some dramatic changes. SpaceX has been spending cash hand over fist, building out computing capacity at its vast data-center sites -- $15.8 billion in capex last quarter alone. However, it's now locked in with some major customers that are transforming the unit's economics.

Anthropic agreed to pay $1.25 billion per month, Alphabet's Google has signed a $920 million-per-month deal, its Reflection AI deal adds another $150 million per month, and the company just announced a new contract with an unnamed customer that is expected to bring in $1.11 billion per month. Altogether, those agreements represent $3.4 billion in monthly revenue once fully ramped up.

These lease deals represent a huge revenue opportunity and will help SpaceX fund the build-out of its data centers, but long-term, it remains to be seen if this will pay off. The lease deals have short termination clauses, and their enormous projected values are not the same thing as guaranteed revenue.

The contracts give SpaceX a much clearer path toward earning a return on its AI build-out, but investors are still being asked to trust that AI demand -- and pricing for computing power -- will hold up as more capacity comes online.

The bull case

Starlink has the clearest path to success in my view. With rapid growth, incredible margins, and a disruptive technology, it could become a huge moneymaker for SpaceX.

I believe the Space segment will continue to dominate, especially if Starship, the company's gigantic, reusable rocket currently in development, is put into commercial operation successfully. Starship could dramatically lower launch costs while allowing SpaceX to carry much larger payloads, including its next generation of Starlink satellites.

The AI opportunity has also become more tangible now that it has established itself as an important provider of compute. If the company can maintain these contracts and manage costs in its continued compute build-out, the AI division could become a key part of the company's financial stability -- a far cry from where it has been up to this point.

If SpaceXAI catches up to the competition in model quality and makes major inroads with enterprise customers, that could provide another major layer of upside.

The bull case doesn't require every one of these bets to work perfectly, but it does require most of them to mostly work out.

The valuation leaves no room for ordinary results

Although the opportunities are genuinely huge, so too are the costs. None of the businesses it's engaged in are cheap, especially building AI computing capacity. And I think there's a substantial risk there. I believe we are headed toward a world in which AI is seen more as a commodity and data center providers act more as utilities -- high capital costs and low margins.

And while, as I said, I see the launch business continuing to dominate, I'm not sure the market is as large as it may seem. Starlink, too, could have more of a ceiling than investors are anticipating.

If SpaceX carried a more reasonable valuation, these issues might not be issues at all, but the stock is priced for near perfection and the future it projects may be more science fiction than fact. Of course, I may be forced to eat my words, but I think, over the long haul, SpaceX stock will underperform, and I think a $10,000 investment will be worth about $10,000 five years from now.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.