Alphabet Over SpaceX: Why the Tech Titan Presents a Superior Value Proposition

Key Points

• Space Exploration Technologies (SpaceX) went public in June, but has since shed a third of its peak value.
• Despite this decline, SpaceX remains highly valued relative to the broader market, suggesting investors may find better value elsewhere.
• Google parent Alphabet is generating strong, profitable growth at a highly reasonable valuation.

Space Exploration Technologies, founded by Elon Musk in 2012, originally aimed to reduce the cost of space travel but has since expanded into satellite connectivity and artificial intelligence (AI). The company went public in June, and investor enthusiasm quickly drove its stock to a peak of $225. However, the share price has since declined by 32%, closing at $152.71 last Friday. Despite this recent slide, SpaceX maintains a massive market capitalization of $2.1 trillion. With only $23 billion in revenue over the past four quarters, its stock trades at a staggering price-to-sales (P/S) ratio of 91—nearly 15 times more expensive than the technology-heavy Nasdaq-100 index.

This suggests further downside may be ahead, making SpaceX a risky bet. If I had $10,000 to invest today, I would look elsewhere. This is why Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) might represent the superior long-term purchase.

Image source: Alphabet.

AI is transforming Google Search and Google Cloud

Chatbots like OpenAI’s ChatGPT offer a fast and easy way to find information online, so investors were initially worried they would disrupt the world’s largest internet search engine, Google Search. Alphabet draws more than half of its total revenue from the advertising dollars generated by Google Search, so this would have been a massive problem, but the company has since transformed the platform with a suite of AI features of its own.

The first is AI Overviews, which combine text, images, and links to third-party sources to provide AI-generated answers to most Google Search queries. They appear above the traditional search results, giving users fast answers so they don’t have to sift through web pages. Then there is AI Mode, which opens a chatbot-style interface where users can ask additional questions and dive deeper into their original query.

AI Mode launched last October, and it already has over 1 billion monthly active users. Alphabet says both of the new AI features have increased Google Search usage overall, which means users are seeing more ads, and the platform is generating more revenue. In fact, Google Search delivered a record $63.3 billion in revenue during the second quarter of 2026, up 17% from the year-ago period.

Google Cloud is also firing on all cylinders thanks to AI. The platform provides enterprises with access to computing capacity via Alphabet’s state-of-the-art data centers, in addition to a suite of ready-made models to help them turn that capacity into usable AI software. Google Cloud is consistently Alphabet’s fastest growing business, with second-quarter revenue surging by 82% to $24.8 billion.

But that growth rate could accelerate even further in the future, because Google Cloud ended the second quarter with a $514 billion order backlog from customers who were waiting for more data center capacity to come online.

Alphabet stock is attractively valued

While SpaceX stock trades at a sky-high P/S ratio of 91, Alphabet’s P/S ratio is at a far more reasonable level of 9.5. Plus, Alphabet is highly profitable whereas SpaceX is losing money, so we can also value its stock using the price-to-earnings (P/E) ratio.

Wall Street’s average estimate (provided by Yahoo! Finance) suggests Alphabet could deliver earnings of $14.91 per share in 2027, placing its stock at a forward P/E ratio of just 23.4. It’s actually cheaper than the Nasdaq-100 by that metric, because the index has a forward P/E ratio of 24.2.

GOOGL PE Ratio (Forward 1y) data by YCharts

Investors who buy SpaceX stock today are relying on hyper-bullish forecasts from members of its management team to justify their potential returns. Chief financial officer Bret Johnsen believes the company’s AI business can achieve $100 billion in annual run-rate revenue by the end of 2026, and chief executive officer Elon Musk is forecasting $1 trillion in annual revenue by 2030. Achieving those lofty goals will require exponential growth in demand for AI infrastructure, and absolutely perfect execution.

Alphabet is already attractively valued with strong, profitable growth across its core businesses. As a result, I think it will be a more rewarding investment compared to SpaceX over the next few years.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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