Does the SpaceX IPO Mean You Should Ditch Rocket Lab?

Well, it finally happened. Space Exploration Technologies (NASDAQ: SPCX) has gone public, and it is officially the largest IPO in history. As the seventh-largest company in the world by market value, all the oxygen in the stock market is being sucked away from other space-economy stocks into the Elon Musk-led rocket launch and artificial intelligence (AI) giant.

Take Rocket Lab (NASDAQ: RKLB). The upstart spaceflight competitor has seen its shares quickly dip 32% from their highs in anticipation of the SpaceX IPO. At around $100 a share, should you buy the dip on Rocket Lab? Or should you ditch it and buy SpaceX shares?

Image source: Getty Images.

SpaceX's grand AI plans

If we're talking about a company's pure ambition, then it is hard to get grander than SpaceX. Musk and the SpaceX team have a vision of building orbital compute data centers, providing global satellite internet service through Starlink, and eventually even establishing a colony on Mars.

Starlink is an $11.4 billion revenue business, and growing 50% year over year. But for the rest of SpaceX -- which also includes X (formerly Twitter) and the xAI research lab -- an investment in this stock is based on future potential. In 2025, SpaceX's total revenue was just $18 billion, meaning over half of its sales came from Starlink internet services.

2026 should prove to be a banner year for growth, driven by recent contract wins from Alphabet and Anthropic for AI computing services, totaling $26 billion in annual AI spending. SpaceX has built massive data centers that are currently underused, which, on the one hand, shows the disappointment with its own AI software, but on the other hand shows the company's and Musk's ability to accurately predict the future of technology.

Right now, SpaceX trades at a market cap of $2.1 trillion, or more than 100 times its 2025 revenue. Its price-to-sales ratio (P/S) will decline sharply over the next few years if these growth initiatives materialize, but it is now officially one of the most expensive stocks in the world following this blockbuster IPO.

Rocket Lab's focused potential

Rocket Lab is taking a path more focused on SpaceX's original business model: shipping payloads to orbit through private rocket launches. It began operations with a small rocket called the Electron, built for specialty payloads that require precise positioning in the sky.

The Electron rocket now regularly launches payloads into orbit for commercial customers and the United States government. Capitalizing on this success, Rocket Lab has built and acquired capabilities to vertically integrate across the space economy, meaning it builds products like satellites, launch pods, and communication systems for third parties that also utilize the Electron launch capabilities. With this business model, Rocket Lab's revenue has grown to $680 million over the last 12 months, up 1,000% in the last five years.

To get closer to SpaceX's size, Rocket Lab is building a larger rocket called the Neutron, with plans to debut it later this year. It should lead to a step change in revenue generation, directly from launch costs and from more commercial players utilizing Rocket Lab's vast array of space-economy services.

It wouldn't be surprising to see Rocket Lab's revenue grow into the billions in the next few years. However, even after this steep drop, the stock still trades at an expensive market cap of $60 billion, or a P/S ratio of 89.

Data by YCharts.

Which space stock is the better buy?

Given the size of the business, the best bet for investors today may be Rocket Lab over SpaceX. With a market cap of $2.1 trillion and 2025 revenue of less than $18 billion, it is hard to imagine any scenario in which SpaceX delivers stellar results for shareholders.

The same can likely be said of Rocket Lab over the next decade. Space flight is hard, and the Neutron rocket has faced many delays on its path to commercialization. Rocket Lab may do fine for investors over the next two decades if it grows to the size of SpaceX, but that does not mean you should load up on the stock.

For investors, the smart move is to avoid both SpaceX and Rocket Lab and their extremely elevated P/S ratios.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Rocket Lab. The Motley Fool has a disclosure policy.