I'm No Longer Interested in SpaceX, and Elon Musk Is the Reason

For as long as I can remember, I have wanted to invest in Space Exploration Technologies (NASDAQ: SPCX).

Not quite as long as there has been a SpaceX, mind you. (The company was officially founded in 2002.) But beginning around 2015, when SpaceX attracted a $1 billion investment from Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Fidelity to help SpaceX build a constellation of broadband internet satellites -- that's about when SpaceX first appeared on my radar.

SpaceX had a private market cap of about $10 billion at the time -- a long way from its current $2.4 trillion market cap. But even back then, I could see the possibilities in a company that was undercutting Arianespace and United Launch Alliance on the cost of space launch and planning to use ultracheap rockets to sell affordable satellite internet service to the world.

Today, SpaceX has fully realized this potential, and its stock is up 240-fold as a result. But here's the craziest part: Even after such an incredible run-up, I'd probably still consider investing in SpaceX alone if that were possible.

The problem is that, thanks to how Elon Musk structured the SpaceX IPO, this is not possible.

Image source: The Motley Fool.

Why buy SpaceX?

To understand the logic here, consider a few numbers from the SpaceX IPO prospectus.

Like Caesar's Gaul, all of SpaceX is divided into three parts:

• Space, the segment that we used to just call SpaceX, reported losses of $657 million on $4.1 billion in revenue last year.
• Connectivity, which everyone but SpaceX just calls Starlink, earned $4.4 billion on $11.4 billion in revenue.
• AI, which consists of the social media division, X, and the artificial intelligence division, xAI (Grok), lost $6.4 billion last year on revenue of only $3.2 billion.

In case you hadn't guessed, that's the part I don't like very much. The AI segment is the reason I won't invest in SpaceX even after the IPO, and even after its stock price has started falling back down to Earth.

Take the first two parts of SpaceX and consider them separately from the AI segment.

Space and connectivity comprise what I've always thought of as the real SpaceX: a dominant space business that's at least a decade ahead of the competition, launching reusable rockets at prices no one else can match, with a dominant satellite internet business that produces the bulk of the profits.

If the space and connectivity segments were all that made up SpaceX, they'd have had a combined 2025 revenue of $15.5 billion and earned about $3.8 billion in operating profit on that revenue. This would make for a tremendous 24.5% operating profit margin.

Comparing 2024 numbers to 2025, this business grew revenue by 36% per year and earnings by 90%. Let's assume those growth rates held (an ambitious goal, but we;re spitballing here). At those kinds of margins and that kind of growth, I'd happily pay 90 times earnings (giving the stock a 1.0 PEG ratio), or more grudgingly pay as much as 180 times earnings (for a PEG of 2.0).

Coincidentally, that would work out to about $700 billion for the two businesses -- a price very close to the $800 billion private valuation that SpaceX fetched just before its IPO.

Image source: SpaceX.

Why not buy SpaceX?

Post-IPO, of course, SpaceX stock already costs much more than this -- $2.4 trillion, if you recall. And the reason for this overvaluation can be summarized in just two letters: AI.

Clearly, Elon Musk believes 100% in the AI revolution. This is why he splashed out $60 billion last week to buy Cursor. He's convinced that eventually, AI will generate the bulk of SpaceX's business, citing a $26.5 trillion total addressable market for AI services, subscriptions, and infrastructure.

Problem is, according to the prospectus, SpaceX's AI division grew its revenue only 23% between 2024 and 2025, even as its operating losses quadrupled to $6.4 billion. This poses two problems for investors.

First, this means that not only is SpaceX's AI division unprofitable, but it's also not even growing as fast as the profitable space and connectivity divisions. (Or at least, it didn't in 2025. In Q1 saw a year over year slowing in Space's revenue growth rate, while AI growth took off as SpaceX began selling computing power to Anthropic. Musk says the Anthropic deal is "short-term," however, so it remains to be seen how durable this growth spurt will be.)

Second, attaching unprofitable AI to these profitable businesses is the No. 1 reason the price tag on SpaceX stock ballooned from $800 billion before the IPO to $2.4 trillion after it!

The upshot for investors

It's the worst of both worlds: By burdening space and connectivity with AI and forbidding investors from buying one without the other, SpaceX has destroyed the profitability of its good businesses -- and required investors to buy the bad ones.

And this, in a nutshell, is why I'm no longer interested in owning SpaceX stock.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.