Should You Ignore the SpaceX Hype and Buy Rocket Lab Instead?

Space stocks blasted off earlier this year, fueled by Space Exploration Technologies' (NASDAQ: SPCX) blockbuster June initial public offering. The excitement lifted companies across the space economy, sending many stocks soaring ahead of the public-market debut.

Since then, investors have encountered some turbulence. SpaceX remains near its IPO price, but shares have swung wildly between $105 and $225. Rocket Lab (NASDAQ: RKLB) has seen an even sharper reversal, plunging 65% from its June peak near $150.

That pullback may have created an opportunity. For investors seeking exposure to the growing space economy, is Rocket Lab now a better buy than SpaceX?

Image source: The Motley Fool.

SpaceX is seeing strong growth outside of launch services

SpaceX recently reported earnings, which highlight its expansion far beyond launch services. In the period, revenue from launch services was $1.8 billion, up 6% from one year ago.

SpaceX made 35 launches during the period. Additionally, Starship Flight 14 successfully reached orbit and deployed Starlink V3 satellites. Looking ahead, SpaceX plans to launch Starship weekly in the first half of next year, aiming for two launches per week by year-end.

Beyond launch services, Starlink revenue grew 69% year over year to $5.2 billion. The company reached 13.6 million global consumer broadband subscribers during the period. The company also made headlines by announcing plans to become a major U.S. mobile carrier, challenging AT&T and Verizon.

While Starlink grew quickly, SpaceX's AI segment -- which it now calls the Super Intelligence (SI) segment -- grew even faster. Revenue was $7.6 billion, up $5 billion quarter over quarter and $6.7 billion from last year. The company saw strong growth thanks to compute leasing agreements, such as the massive $84.5 billion deal with Anthropic, and the growing use of its Grok AI models.

Rocket Lab provides pure-play exposure to the space economy

SpaceX is a wide-ranging business at the intersection of space, communications, and AI. For investors who prefer a company focused only on the space economy, Rocket Lab may be a better buy.

Rocket Lab focuses on launch services, space equipment, and related infrastructure. The company uses its Electron small-lift rocket and is the second-most-used launch provider in the U.S., far behind SpaceX. With Electron, Rocket Lab can carry up to 660 pounds to low Earth orbit.

In addition, Rocket Lab's medium-lift rocket, Neutron, will be able to carry payloads that are 40 times larger. This will help Rocket Lab compete more effectively with SpaceX's Falcon 9 and win larger contracts, boosting margins. The company hoped to launch Neutron this year, but setbacks have pushed that timeline to 2027, with testing slated for the first quarter.

Rocket Lab's space systems business is also growing at a nice clip. The company provides specialized aerospace components, including rovers, star trackers, and flight software. Rocket Lab has a nearly $2.4 billion backlog across its launch and space systems businesses.

Investors are paying up for both SpaceX and Rocket Lab

SpaceX is massive, with its $2.2 trillion market capitalization. By comparison, Rocket Lab's market cap is $30 billion. On a valuation basis, both companies are very expensive, and investors are paying up for future growth: SpaceX trades at nearly 70 times trailing sales, while Rocket Lab trades at 40 times sales.

For investors looking for broad exposure to space, artificial intelligence, compute, and communications, and who believe in Elon Musk's vision, SpaceX is the stock for them.

However, if you want a pure-play aerospace company with no exposure to AI capital expenditure fluctuations, Rocket Lab is the better pick today. But expect continued volatility as it prepares to launch its Neutron rocket, since further delays could continue to weigh on Rocket Lab stock in the near term.

Courtney Carlsen has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.