Is SpaceX Stock Worth Buying While It's Below $140?

Space Exploration Technologies Corp (NASDAQ:SPCX) fell by 11% in October as investor sentiment has begun to sour on artificial intelligence (AI) stocks. While SpaceX is known for its rockets, which have captivated many growth investors, it's largely an AI stock, as that's where the bulk of its opportunity is and where the majority of its revenue comes from.

The stock has been falling along with other AI stocks lately, and now it's below $140 and trading close to its IPO price of $135. While the stock may seem appealing right now, here's why I wouldn't buy it.

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The stock trades more on its growth story than its fundamentals, and that's risky

Elon Musk has done a fantastic job of building up the vision for SpaceX. Sending people to Mars, building data centers in space, and being a leader in AI are some of the lofty ambitions he has for his company. Those are all amazing goals, but they are by no means a certainty. Earlier this year, the New York Times examined more than 600 claims Musk made about his companies and found that, in most cases, his goals were hard to prove he had met, or, if he did, he was often late (sometimes by years).

However, it's that long-term hope and potential that has made investors look past fundamentals and valuations and be willing to buy the growth stock, even at a market cap of around $2 trillion.

While the company did post an operating profit in its most recent quarter, which ended on Sept. 30, that was largely from its connectivity business, which includes Starlink. The space segment remains unprofitable, and while the company's Super Intelligence segment was modestly in the black, capex spending in the past quarter totaled $16.4 billion for just that area of its operations -- that’s more than the company's entire quarterly revenue for the period ($14.6 billion).

The company is investing aggressively in AI, and that can be risky if the payoff doesn't prove to be there.

SpaceX stock still isn't a cheap buy

SpaceX's business is growing fast, and it has vast aspirations, but paying a big premium for a stock based on where it might be in 10-plus years is incredibly risky. There's a lot that can go sideways, and there's plenty of competition in AI. And if demand slows, as it might amid rising interest rates, even that high-growth area of its business may stumble in the short term, resulting in worse-than-expected top-line numbers.

Investors who are willing to take on the risk and uncertainty that comes with buying SpaceX stock should brace for continued volatility, because regardless of how the business ends up doing, one thing's for sure: it's not likely to be a smooth ride for investors given not just the valuation but also the expectations that come with the stock.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.