SpaceX vs. Nvidia: The Best AI Stock to Buy Now

Few companies are more synonymous with artificial intelligence (AI) investing than Nvidia (NASDAQ: NVDA). It's been the leader in AI investing since the AI build-out kicked off in 2023, and nothing has changed since. However, there are many new investment options in the AI world, including Space Exploration Technologies (NASDAQ: SPCX). SpaceX has a major AI wing thanks to its acquisition of xAI before going public, and this division has delivered incredible growth.

In fact, it has some investors wondering if it's one of the best AI investments on the market right now. But is it better than Nvidia?

Image source: Getty Images.

Nvidia and SpaceX are partners

One thing to note is that Nvidia and SpaceX aren't competitors; they're partners. Nvidia makes graphics processing units (GPUs), which are broad-purpose computing units that excel in nearly any environment. This makes them extremely flexible, and with Nvidia's GPUs being recognized as the best available, they're quite popular. In fact, SpaceX CEO Elon Musk said that Nvidia's new Vera Rubin architecture is the best available and that SpaceX will exclusively deploy Nvidia's products for its AI endeavors. That's a pretty notable endorsement, and it solidifies the relationship between these two.

SpaceX's AI product centers around its Grok large language model. This has become a popular model to use because it's connected to X, which helps it understand current events. It also offers other products like Grok Bots, which are becoming popular because they give users access to AI agents that can handle tasks on their behalf.

Nvidia and SpaceX are two distinct investments, as Nvidia is on the infrastructure side, and SpaceX is on the application side. Although there's still a lot of AI computing infrastructure to build, companies are starting to move into the application phase of AI, which may favor SpaceX delivering better results. That's exactly what we're seeing now, as SpaceX just blew expectations out of the water in the third quarter.

SpaceX just delivered incredible growth

During Q3, SpaceX's Super Intelligence (SI) division (the new name of its AI division) saw revenue increase at a jaw-dropping 830% rate. While this quarter's results included an acquisition that boosted the segment's overall growth rate, it was still a monster quarter for SpaceX. In fact, it topped anything that Nvidia has ever delivered during the AI build-out.

NVDA Revenue (Quarterly YOY Growth) data by YCharts.

While Nvidia's most recent 106% growth rate is still very impressive and nothing to complain about, it just isn't growing nearly as fast as SpaceX. However, there is one huge difference.

SpaceX is more focused on capturing market share, so it doesn't care a lot about profitability. Still, its operating income for its AI division was $431 million on revenue of $7.56 billion, good for a 5.7% margin. On the flip side, Nvidia's operating margin for its most recent quarter was 66%.

This means that Nvidia is producing huge profits while SpaceX's are comparatively minimal. That should be expected based on the phase each company is in. Still, the speed at which Nvidia is already growing, combined with incredible profitability, causes me to prefer Nvidia's financial picture.

There's still one more piece to the puzzle.

Nvidia's stock is far cheaper

Because SpaceX is barely profitable, I think valuing it based on expected sales this year makes the most sense. Right now, SpaceX has a market cap of $2 trillion, and Wall Street expects 2026 revenue of $48.6 billion. That equates to a forward price-to-sales ratio of about 41. Nvidia is expected to generate $411.7 billion in revenue this year. With a market cap of $5.1 trillion, Nvidia's stock is priced at just 12 times sales.

So, Nvidia is about three times cheaper than SpaceX on that measure, which I think solidifies Nvidia as the best AI stock to invest in right now.

While SpaceX could still be a solid AI choice, Nvidia is a far safer and more surefire pick.

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