Could $5,000 Invested in SpaceX Help You Retire a Millionaire?
Key Points
It's highly unlikely SpaceX can turn a $5,000 investment into a $1 million.
However, that doesn't mean the stock can't have strong returns ahead.
Could making a $5,000 investment in SpaceX (NASDAQ: SPCX) help you retire a millionaire? That's highly unlikely by itself; after all, the stock would have to increase by 200 times. That would put it at a valuation of around $400 trillion.
To put that in perspective, total global gross domestic product (GDP) is expected to come in at around $126 trillion this year. Meanwhile, at the time of its IPO this past June, SpaceX placed its total addressable market (TAM) at an eye-popping $28.5 trillion. TAM is the amount of revenue a company would generate if it could capture every opportunity for itself in the market.
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SpaceX's TAM drew a lot of scrutiny when it was published. Of the total, $26.5 billion was related to artificial intelligence (AI), and $22.7 billion of that was related to AI enterprise applications. This includes AI applications, agents, and software that help improve productivity, automate workflows, and increase operational efficiency. The number is based on the Digital Cooperation Organization's estimate of the entire 2026 digital economy, outside of China and Russia. The one issue with this is that segment is not a big area for SpaceX currently and not one it has been pushing.
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Can investors still make a lot of money on SpaceX stock?
While a small investment in SpaceX is unlikely to make anyone a millionaire any time soon, whether it can be a highly profitable investment is a different story. And the answer to that question is very much in the air.
On the AI side, SpaceX has mostly been focused on renting out compute power and AI infrastructure. It's been seeing great returns on this business, saying it's seeing a payback in less than a year. That's much better than the two to three years Amazon has talked about, and the two years Alphabet disclosed, with it being around one year for its own chips.
The reason that SpaceX is getting better economics, despite only using expensive Nvidia chips and not having its own silicon, is because right now it's largely acting as a bridge provider. Compute capacity is so constrained that SpaceX has been able to get overflow work from cloud providers, like Alphabet, at huge premiums. Right now, this is the company's fastest-growing business, and what likely drives it to $100 billion in annual recurring revenue (ARR). However, it's getting surge economics that won't last, and investors aren't placing a $2 trillion valuation on SpaceX to be a neocloud company.
The company's Starlink satellite internet business is its most profitable business, and it has been growing quickly. This is a nice recurring-revenue subscription business, and the company has talked about eventually trying to compete with wireless carriers. However, this will likely need to be accompanied by a big terrestrial infrastructure buildout or the acquisition of a wireless carrier. And once again, investors aren't assigning SpaceX its current valuation as a future wireless carrier, a group that carries very low valuation multiples.
What needs to happen for the stock to work long term
For SpaceX stock to work over the long term, some of its big future bets are going to have to pay off. This starts with Starship and finding a way to recapture both the super-heavy booster and upper stage of the rocket for rapid reuse. This would completely change the economics of space launches and open the door for its ambitions to put data centers in space, as well as other ventures like point-to-point travel.
Having a network of data centers in space is one of SpaceX's biggest goals. One of the issues with terrestrial AI data centers is that they consume an enormous amount of power, but with near-endless sunlight, space-based data centers could be solar-powered. While there are other technological challenges to overcome, achieving this at scale could help not only justify SpaceX's current valuation but also push its shares significantly higher. The stock likely won't skyrocket 200 times, but nice long-term gains are still possible.
Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.