SpaceX (NASDAQ:SPCX) has quickly become like Marmite in the stock market. Some investors love the outlandish vision to colonise Mars and fully buy into the growth story, while others hate the hype and predict a crash.
What everyone is agreed on though is that SpaceX is an incredibly expensive stock right now. I mean, the fact that the rocket/satellite/AI company is posting losses yet went public at a $1.78trn market cap — now at $2.43trn! — is wild.
On top of this, some of the parabolic moves in semiconductor stocks are reminiscent of the dot-com boom and bust. Take Intel, which is up 600% in less than a year.
The risk is obvious when you look at the share price chart.
Then there’s the Nasdaq-100, which houses most of these chip stocks and is sitting just off an all-time high. The index is sporting a price-to-earnings (P/E) ratio of 43, according to BlackRock. That’s well above its historical average.
What does all this tell us?
Putting all this together then, it suggests a big US market correction might be in the works. And that would normally negatively impact UK stocks too.
But this is a strange market. Back in 2020/21, nearly everything melted up, including tech shares, meme stocks, and obscure cryptocurrencies. Tesla stock rocketed 1,200% between early 2020 and late 2021. FOMO was rampant.
Today, though, I see differences from previous bubbles. Granted, there’s a revolutionary technology in AI that might surpass the internet in terms of impact. But we also have surging corporate earnings at AI-related firms like Palantir, Nvidia, and Micron.
The AI boom is being driven by massive, existing cash flows (and now debt) from established tech giants. In contrast, many early internet companies lacked a clear business model or product-market fit. So this is not an identical replay.
Moreover, not everything ‘growthy’ is going up today, like it was in 2020/21. Far from it. Cryptocurrencies have crashed, alongside many software stocks deemed to be at risk from AI.
Meanwhile, a lot of growth shares not linked to the AI infrastructure buildout are down or treading water. And many ‘quality’ stocks — characterised by consistent earnings, low debt, high returns on capital, and wide moats — remain deeply out of favour.
This is not another straightforward melt up.
How pricey is SpaceX?
Returning to SpaceX, could this spark a stock market crash? Potentially, as it’s set to join the Nasdaq-100 in July, and is already the sixth-largest US firm by market cap. So SpaceX bombing could really damage market sentiment.
Plus, as mentioned, the valuation is astronomical. Even if we assume SpaceX achieves forecast revenue of $37bn this year, that still translates into a forward-looking price-to-sales multiple of approximately 65.
Basically, SpaceX is an amazing growth company, but the stock is extremely overvalued.
Treading carefully
On the other hand, the global AI buildout shows no sign of ending anytime soon. So it’s possible that SpaceX stock crashes while US indexes chug even higher.
Unlike 2021 when I stopped investing due to excessive speculation, I see this market as different. Some parts look overheated, but many others still appear to offer solid value.
What I’m going to do then is avoid SpaceX but not the entire market. Quite a few shares are piquing my interest right now.
Should you invest £5,000 in Space Exploration Technologies Corp. - Class A right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Space Exploration Technologies Corp. - Class A made the list?
Ben McPoland owns shares in Nvidia.
