Key Points
SpaceX's AI business is growing rapidly, and management thinks space-based data centers could unlock even more long-term value.
A high valuation and political headwinds are causes for concern.
In this inflation-riddled economy, $1,000 might not seem like a lot. But if that money is invested in the right company at the right time, it could create a foundation for life-changing returns over the long haul. Many investors are curious whether Space Exploration Technologies (NASDAQ: SPCX) has what it takes to go the distance after its record-setting $1.77 trillion initial public offering in June.
SpaceX has a lot going for it. CEO Elon Musk is no stranger to innovation and proving his naysayers wrong. And the company's spectacular recent results suggest he hasn't lost his Midas touch.
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That said, the company still faces significant uncertainty, especially considering its sky-high valuation and the changing political climate after the Democrats swept the midterm elections. So what might a $1,000 investment might be worth by the end of next year?
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Business is booming
Usually, large companies offer investors relative stability at the expense of high growth. But SpaceX flips this dynamic on its head. The space and artificial intelligence giant is growing like a weed, with third-quarter revenues soaring by 161% year over year to $14.1 billion, driven by the company's artificial intelligence segment, where revenues rose 830%. The AI segment, which SpaceX now calls its "super intelligence" unit, makes most of its money by accumulating data center hardware and renting out compute to clients that need to run and train large language models (LLMs).
The company has secured several deals with major AI companies like Anthropic and Alphabet, which is paying SpaceX a whopping $920 million per month for access to AI compute capacity. That said, it's difficult to know how long these types of deals will last, because many of SpaceX's clients have an incentive to invest in building their own data centers (and designing their own chips) rather than relying on third-party solutions. And most of the deals can be cancelled with a few months notice by either party.
SpaceX's management seems to be aware of that problem, and the company aims to bolster its moat by deploying a constellation of data center satellites in Earth orbit. If the technology works, it could offer significant advantages over ground-based compute due to abundant and essentially free solar energy, easier cooling, and perhaps less regulatory pushback. That last point may be more important than ever considering recent political developments.
SpaceX faces huge political risks
While most business leaders avoid partisan politics to avoid the risk of potential brand damage, Musk has taken a different approach. He went all-in for Republicans and President Donald Trump in both 2024 and again in the 2026 U.S. midterm election, when he spent $474 million to support GOP candidates, including a whopping $224 million in Texas alone, where SpaceX has its headquarters, as well as significant launch and manufacturing facilities.
Musk's campaign contributions are constitutionally protected free speech. However, investors would be naive to assume that his actions can't have negative consequences for his companies.
Every Musk-backed Republican lost their election. Meanwhile, the Democrats are promising to impose more regulations on data center construction, which could slow the pace of AI expansion and drive up costs. On the other side of the business, SpaceX's Texas launch operations have already faced significant pressure from environmental groups. These headwinds are likely to increase over the coming years.
What will a $1,000 position be worth by the end of 2027?
While SpaceX is a rapidly growing business, it faces substantial challenges from political uncertainty. And trading at a price-to-sales multiple of 55 (compared to the S&P 500's average ratio of just 3.6), its speculative valuation doesn't leave much room for error.
The potential for a mega-merger with Musk's other public company, Tesla, could make the problem even worse by saddling the combined company with a stagnating electric vehicle business.
With all this in mind, I don't see an investment in SpaceX growing substantially over the next 14 months. A $1,000 position opened today will probably still be worth around $1,000 in a base case scenario.
Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Space Exploration Technologies, and Tesla. The Motley Fool has a disclosure policy.