Nvidia and SpaceX Strengthen AI Ties: Which Stock Offers Better Long-Term Value?

Key Points

Space Exploration Technologies (NASDAQ: SPCX) and Nvidia (NASDAQ: NVDA) may not seem like related companies, but they are closely linked. SpaceX owns xAI, which develops the Grok AI model. To power this ambitious operation, xAI relies heavily on Nvidia’s cutting-edge hardware. Recently, SpaceX CEO Elon Musk made a highly anticipated statement reinforcing Nvidia’s dominance in the AI compute landscape, cementing its position at the forefront of the industry.

Given the close relationship and mutual growth, which of these two powerhouses presents the more compelling investment opportunity over the next year and a half? An analysis of their financial trajectories and valuation metrics suggests one stock offers significantly more upside potential before 2028.

Image source: Getty Images.

SpaceX Commits to Exclusive Nvidia Hardware

During SpaceX’s second-quarter earnings call, Elon Musk elaborated on the company’s strategic partnership with Nvidia:

We’ve decided to build exclusively on NVIDIA because we think the Vera Rubin architecture is the best architecture. We think it’s the best AI computer, and we greatly value our close cooperation and partnership on many levels with NVIDIA. So, we’re exclusive to NVIDIA.

This definitive commitment highlights the critical role Nvidia’s hardware plays in supporting xAI’s large-scale AI operations. As a major competitor in the AI model space, xAI’s exclusive reliance on Nvidia underscores the chipmaker’s technological leadership and strong positioning within the ecosystem.

Comparing Growth and Financial Health

While both SpaceX and Nvidia are experiencing rapid expansion, their financial profiles differ significantly. SpaceX is still navigating the path to consistent profitability, even as its revenue surged 92% year-over-year to $7.8 billion in the second quarter. Its AI division demonstrated exceptional strength, growing 213% year-over-year, though the segment reported an operating loss of approximately $143 million.

In contrast, Nvidia continues to post record-breaking financial results. The chip giant achieved $96.2 billion in revenue, representing a 106% year-over-year increase, and converted a substantial $63.7 billion into operating income. Nvidia demonstrates highly optimized profit margins and massive scale compared to the private space and AI venture.

Valuation and Future Upside

Despite Nvidia’s massive revenue stream being more than twelve times larger than SpaceX’s, the market valuation of the two companies shows an interesting disparity. Nvidia is valued at approximately $5.5 trillion, while SpaceX stands at $2 trillion. This gap suggests that while SpaceX carries a heavy premium based on future growth expectations, Nvidia is trading at a remarkably attractive valuation relative to its performance.

Looking ahead to 2027 estimates to gauge their potential by 2028, Nvidia trades at roughly 14.5 times forward earnings, which is highly competitive compared to other tech giants like Alphabet or Amazon. Meanwhile, with SpaceX projected to generate $108 billion in revenue, its valuation sits at about 18.5 times sales. In comparison, Nvidia’s valuation is approximately 8.1 times next year’s projected sales. This substantial discount makes Nvidia the more appealing investment for those looking for a balance of growth and valuation safety.

NVDA PE Ratio (Forward 1y) data by YCharts

While SpaceX holds exciting long-term prospects, Nvidia’s market leadership, dominant profitability, and cheaper valuation make it the superior choice for investors seeking robust returns in the coming years.

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