Better AI Stock: SpaceX vs. Nvidia

Nvidia (NASDAQ: NVDA) and Space Exploration Technologies (NASDAQ: SPCX) are two monstrous companies. Nvidia is valued at about $5.5 trillion, while SpaceX is a $2 trillion company. The world's first trillion-dollar company didn't appear until 2018, showing how far the market has come in just a short period of time.

A lot of that growth is thanks to a bullish outlook on the artificial intelligence build-out, and these two often come up as top AI options. But which is the best pick? Let's take a look.

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Nvidia and SpaceX are partners in AI

Nvidia and SpaceX are two completely different investments in the AI field. Nvidia is more of a hardware play, while SpaceX is an application play.

Nvidia makes graphics processing units (GPUs), which are the computing muscle behind many AI workloads today. Although it has rising competitors, Nvidia's products still sit atop the AI computing unit food chain. In fact, SpaceX Chief Executive Officer Elon Musk had this to say about Nvidia's computing units during its Q2 conference call:

And going forward, we've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture. We think it's the best AI computer, and we greatly value our close cooperation and partnership on many levels with Nvidia. So, we're exclusive to Nvidia.

This is a pretty definitive statement that SpaceX will be a solely Nvidia-powered business. The architecture Musk is talking about is Nvidia's new Vera Rubin architecture, which is entering production right now. This promises a 10-fold reduction in inference costs and a fourfold reduction in training costs compared to prior-generation Blackwell GPUs. That's a huge gain and will keep Nvidia at the top.

SpaceX is a bit of a different AI play. Before going public in June, SpaceX purchased xAI, which produces the Grok AI model. The Grok model is a fairly popular large language model family, although it may not have the same status as ChatGPT or Claude. Still, it's a rapidly growing part of SpaceX's business, with xAI's revenue soaring 213% in Q2. xAI will be a profitable and successful business unit for SpaceX if it can continue expanding its reach and integrate into various applications. This token usage will drive a strong recurring revenue stream for xAI.

We're in the early innings of the AI boom, and the Grok family of models could gain a lot of market share during the next few years, or lose it. As a result, it's a bit riskier than Nvidia, which has already established itself at the top of the AI computing unit industry. However, there's much more market to capture and room to grow for xAI, so it's a question of whether you value higher growth with less certainty or slower growth with greater certainty.

Nvidia is already growing at such a rapid pace (revenue doubled in Q2), so I'm going to give it the nod here, because anytime you can pick a stock that's doubling its revenue and has strong projections to continue that growth in the future makes for a smart pick.

But that's not Nvidia's only advantage.

Nvidia has a reasonable price tag

There's no way around it: SpaceX stock is expensive. First off, SpaceX isn't profitable, so we need to use sales to value the stock. For this year, Wall Street analysts estimate it will generate about $45 billion in revenue. Nvidia's revenue is expected to be about $412 billion.

So, if these two traded at the same price, Nvidia should be valued at nearly 10 times as much as SpaceX. However, that's not the case; it's only valued at about 2.5 times as much.

As a result, I think it's pretty clear that Nvidia is far cheaper than SpaceX, making it the better AI stock to buy.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.