Should You Ignore the SpaceX Hype and Buy Rocket Lab Instead?

Recent events in the space industry have led to investor confusion, prompting questions about the relative merits of investing in SpaceX versus Rocket Lab. Since their respective IPOs, shares of both companies have experienced significant fluctuations. While SpaceX's stock has been relatively stable around its IPO price, Rocket Lab's stock has taken a sharper dive, falling 65% from its June peak.

However, Rocket Lab's decline may present an opportunity for investors seeking exposure to the space economy beyond launch services. The company focuses exclusively on launch services, space equipment, and related infrastructure, providing a more straightforward investment option compared to SpaceX's wide-ranging operations in space, communications, and AI.

SpaceX reported substantial growth in various areas beyond launch services. Its launch services revenue reached $1.8 billion, up 6% year-over-year, thanks to 35 launches. Additionally, Starship Flight 14 successfully reached orbit and deployed Starlink V3 satellites. Starlink revenue grew 69% year-over-year to $5.2 billion, and the company now boasts 13.6 million global consumer broadband subscribers.

SpaceX's AI segment, dubbed Super Intelligence (SI), experienced even more impressive growth, with revenue increasing by $5 billion quarter-over-quarter and $6.7 billion year-over-year.

Rocket Lab, on the other hand, has shown steady growth in its launch services business, with the Electron small-lift rocket being the second-most-used launch provider in the U.S. The medium-lift Neutron rocket, capable of carrying larger payloads, is expected to launch in 2027 after setbacks have delayed its initial timeline. Rocket Lab's space systems business, which includes specialized aerospace components, also grew significantly, with a nearly $2.4 billion backlog.

Valuation-wise, both companies are expensive, with SpaceX trading at nearly 70 times trailing sales and Rocket Lab at 40 times sales. For investors wanting broad exposure to space, AI, compute, and communications, SpaceX remains the preferred choice. However, if one seeks a pure-play aerospace company with no exposure to AI capital expenditure fluctuations, Rocket Lab may be the better investment at present.

Despite potential volatility as Rocket Lab prepares to launch its Neutron rocket, which could be delayed further, investors should consider the unique advantages of each company based on their investment preferences and risk tolerance.