SpaceX Is Spending Big on AI. The Biggest Winner From That Could Be Nvidia

Space Exploration Technologies Corp (NASDAQ: SPCX), also known as SpaceX, is investing heavily in artificial intelligence (AI). While the business may be known for its rockets, it's actually the AI segment of its operations that takes up the lion's share of its capex. While that can lead to significant growth potential for SpaceX and help the stock become more valuable in the future, there's plenty of risk involved with it.

The stock that might inevitably be the biggest winner from SpaceX's feverish AI spending is none other than chipmaking giant Nvidia (NASDAQ: NVDA). Here's why.

Image source: Getty Images.

Elon Musk gives high praise for Nvidia's top chip

On SpaceX's most recent earnings call, CEO Elon Musk stated that the company is going to rely on Nvidia's chips for its AI build-out.

Going forward, we've decided to build exclusively on Nvidia, because we think the Vera Rubin architecture is the best architecture. We think it's the best AI computer, and we greatly value our close cooperation and partnership on many levels with Nvidia.

Spending on AI has been massive for SpaceX, whose capex on that area of its business during just the past three months totaled $15.8 billion, more than doubling from the March quarter, when it totaled $7.7 billion. AI is far and away the biggest component of its capex, accounting for 86% of its expenditures last quarter.

This year, SpaceX expects to have about two gigawatts of compute capacity, potentially rising to 10 gigawatts by next year. SpaceX owns xAI and rents out compute capacity to customers. It also generates revenue from subscriptions for its Grok chatbot and social media platform, X.

The company's AI revenue totaled $2.6 billion last quarter, more than tripling the $818 million it generated just three months earlier. With its AI spending expected to intensify, that leaves Nvidia looking like the big winner from all this, because despite all the growth, SpaceX still incurred a loss of $1.3 billion on its AI segment during its most recent quarter; it's still a highly risky investment.

Nvidia is still a much safer investment option than SpaceX

Although SpaceX may be the shiny new growth stock on the market, its valuation is incredibly high, with a market cap of around $1.9 trillion. It's Nvidia that makes for a better all-around investment today due to its fundamentals and a more reasonable valuation, based on earnings rather than sheer hype and expectations.

Not only is Nvidia highly profitable, but it's also growing rapidly and stands to benefit significantly from companies' continued heavy investment in AI, including SpaceX. It's the better AI stock to own for both the long term and the short term.

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