Could SpaceX Join the Magnificent Seven?

Space Exploration Technologies (NASDAQ: SPCX) has been soaring since its initial public offering on Friday -- in fact, its two-day gain reached 28%, bringing it to a market value of $2.5 trillion. SpaceX now ranks among the largest publicly traded companies on the planet, and here, I'm referring to a group commonly known as the Magnificent Seven.

These players are as follows: Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla. They each are technology giants and leaders in their specialty area -- and together they've led gains in the S&P 500 over the past few years as the artificial intelligence (AI) boom gathered momentum. Each of these players is involved to some degree in AI, as is the newly public SpaceX.

Now, considering SpaceX's businesses, stock market performance so far, and market value, could this company be on track to join the Magnificent Seven? Let's find out.

Image source: Getty Images.

Stocks driving market gains

First, it's important to note that the Magnificent Seven isn't a club or organization with membership requirements. It's a reference to a 1960 Western, and in recent years, it's been used to refer to the top tech stocks driving gains in the overall market.

Being that the group does use the number "seven," though, it's clear that one of two things should happen if an additional company is seen as Magnificent Seven material: Either we unofficially push one of the other companies out or start calling the group the Magnificent Eight. But these are just technicalities that could eventually be worked out. The point today is to figure out whether SpaceX merits a spot among these top tech players.

The points working in SpaceX's favor are its popularity among investors, which has driven gains in the stock price, and its market value. These put it on par with the current Magnificent Seven companies -- they each exceed $1 trillion in market cap. Certain aspects of SpaceX's business also make it a strong Magnificent Seven candidate: For example, like the others, it's involved in AI. (SpaceX's businesses include AI, rocket launches, and satellite-based internet connectivity.) The company has big AI goals, including putting data centers in space -- meanwhile, SpaceX has developed its Grok large language models and built out AI infrastructure on Earth.

The AI business isn't yet a big revenue generator for SpaceX, and instead requires considerable capital expenditures to support growth. Last year, the company's capex for this business alone reached $12 billion.

The Magnificent Seven's track record

And this brings me to a point that works against SpaceX regarding a potential spot in the Magnificent Seven. It's important to keep in mind that all of the Magnificent Seven companies have delivered a long track record of revenue and profit growth. They aren't in the early stages of their growth stories -- some may have new opportunities that will offer a fresh burst of growth, but they still can count on their core businesses to generate earnings quarter after quarter.

For example, even as Meta pours billions of dollars into its AI programs, the company's social media business -- through advertising -- reliably delivers earnings growth, and that offsets the risk of Meta's big AI investment.

These companies have proven and built out technologies that support their profitability even as they explore new areas of growth.

SpaceX, however, isn't profitable, and considering the investments it must make to develop technologies to support its future goals, it's not clear when the company will reach lasting profitability. Meanwhile, revenue levels also seem small compared to those of its big tech peers. For example, last year, SpaceX generated $18 billion in total revenue, while Alphabet brought in more than $400 billion.

The bottom line is this: The Magnificent Seven stocks each built out their businesses and technologies to deliver significant levels of revenue and profit, then went on to reach trillion-dollar market values. SpaceX entered the market with a trillion-dollar market value, but it is still in the process of building out its earnings engine.

All of this means that SpaceX surely is an exciting company to watch, and it may eventually deliver explosive earnings growth -- but I wouldn't consider it on par with the Magnificent Seven until it proves itself from an earnings perspective.

Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.