Is Tesla Stock Better Than SpaceX? The Answer Might Surprise You.

Space Exploration Technologies (NASDAQ: SPCX) successfully executed one of the largest IPOs in history on June 12. Even after a the stock tumbled this week, SpaceX's valuation is more than Tesla (NASDAQ: TSLA), another trillion-dollar business led by Elon Musk.

Last year, Tesla booked a $3.8 billion profit. SpaceX, meanwhile, recorded a $4.9 billion loss in 2025. From this perspective, Tesla may appear to be the superior investment. After all, why should investors opt for a money-losing business?

A deeper dive, however, reveals a more telling truth: Both companies trade at extremely high valuations. Even with positive profits, Tesla stock trades at more than 370 times earnings. The S&P 500, for comparison, trades at roughly 32 times earnings.

Why are both stocks trading at such nosebleed levels? The answer to this question reveals a lot about both businesses. It also provides an answer to which stock is better for investors in the long term.

SpaceX and Tesla aren't that different after all

Most investors think of Tesla as an electric vehicle stock. And that's true, at least in part. Last year, Tesla's Model Y was the second-best-selling passenger car in the world. Tesla's Model 3 also came in as one of the most popular sedans globally, electric or otherwise.

But Tesla's auto sales have been declining for several years. Last year, Tesla's auto sales fell by 8%. The year before, the company's auto sales slipped by 1%.

So yes, Tesla very much remains an EV producer. But with declining volumes, its status as an EV company hardly explains its $1.2 trillion market cap, which is higher than 370 times earnings.

SpaceX, too, is a curious case. The company itself claims that its total addressable market for rockets is only around $370 billion. Its satellite connectivity business, meanwhile, only has a total addressable market of $1.6 trillion. So even if SpaceX captured 100% of its long-term growth opportunities in these segments, that would only equate to around $2 trillion -- several hundred billion dollars less than the company's current market cap.

Image source: Getty Images.

The missing link is artificial intelligence. Both Tesla and SpaceX have essentially bet their entire business models on AI. Given that AI is one of the hottest areas of the market right now, investors are willing to pay top dollar for leading AI companies. That's true for Tesla even though its core legacy business is struggling. It's also true for SpaceX despite the company's lack of profitability.

"We believe we have identified the largest actionable total addressable market in human history," management said in SpaceX's IPO prospectus. More than 90% of its total addressable market isn't rockets or satellites, but AI, which is values at $26.5 trillion. Tesla, meanwhile, is chasing a $10 trillion market also based heavily on AI: robotaxis. "We think $8 trillion to $10 trillion for the entire autonomous taxi opportunity throughout the world, from almost nothing," Cathie Wood, CEO of Ark Invest predicts. "That's how quickly AI is going to cause these things to happen."

Which stock is better: SpaceX or Tesla? Surprisingly, both stocks face a very similar fate. If they fail at realizing their AI potential, both shares are likely a sell. If they succeed, it's possible there is plenty of upside to both stocks long term.

It's no wonder, then, that Musk is reportedly looking to merge Tesla and SpaceX. Betting markets currently predict a 51% chance of a merger by March of 2027. Even Musk's biographer is predicting a merger. "I think there will be a Tesla-SpaceX merger buyout, because it makes sense," Walter Isaacson recently told reporters.

Over the next 12 months, it may be moot whether Tesla or SpaceX is a superior stock pick. If betting markets and a growing number of experts are correct, we could see the two businesses become one fairly soon. Their shared AI ambitions are more than enough to justify a merger should regulators and shareholders approve.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.