Time to Buy Nvidia or SpaceX Stock After Their AI Partnership?

As two of Wall Street's most covered stories, Nvidia NVDA) and SpaceX SPCX) are drawing attention after announcing a major partnership that will see SpaceX exclusively deploy Nvidia's next-generation AI hardware across its terrestrial and orbital computing infrastructure.

The news has helped fuel an impressive rally in Nvidia shares, which have spiked nearly 10% in the last month, while SpaceX stock has fallen more than 13% as enthusiasm surrounding its highly anticipated IPO has cooled.

That divergence naturally raises the question of whether investors should buy NVDA for continued upside, SPCX for a rebound, or both.

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Nvidia Lands Another Major AI Win

The partnership represents another significant victory for Nvidia, as CEO Jensen Huang continues to expand the company's reach beyond traditional hyperscale cloud providers.

During SpaceX's first earnings call as a public company on Tuesday, CEO Elon Musk announced that the company would exclusively use Nvidia's Vera Rubin platform to power its AI initiatives, ranging from ground-based data centers to future orbital computing projects.

This agreement further strengthens Nvidia's dominance in the AI accelerator market and reinforces its position as the industry's preferred hardware supplier.

The announcement also gives investors another reason to remain optimistic ahead of Nvidia's next earnings release. The AI chip leader is scheduled to report its Q2 results later this month on Wednesday, August 26, with analysts expected to closely watch management's outlook following yet another high-profile customer win.

Given Nvidia's track record of consistently outperforming expectations and expanding its customer base, the SpaceX partnership could provide another long-term growth catalyst as AI infrastructure spending keeps accelerating.

The current Zacks Consensus calls for Nvidia’s Q2 sales to have surged 96% to $91.71 billion compared to $46.74 billion in the prior year quarter. More impressive, Q2 adjusted earnings are expected to spike 99% to $2.09 per share from EPS of $1.05 a year ago (Current Qtr below).

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SpaceX Delivers a Strong Debut Quarter

While SpaceX shares have struggled following its IPO in June, the company's fundamentals remain impressive.

Earlier this week, SpaceX reported its first quarterly earnings as a publicly traded company, generating $7.81 billion in revenue, a 92% year-over-year increase that comfortably exceeded Wall Street expectations of $6.71 billion.

SpaceX posted a net loss of $541 million, or -$0.09 per share, although this was much narrower than the adjusted loss of $0.26 per share that the Street expected.

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The space exploration leader highlighted strong momentum across its satellite internet services (Starlink), launch services, and its rapidly expanding AI business while unveiling its expanded collaboration with Nvidia.

That said, Starlink is SpaceX’s only profitable business at the moment. Keeping this in mind, investors focused on the company’s aggressive AI capital expenditures (CapEx) and heavy investment plans, sending the stock sharply lower after its Q2 report despite the revenue beat.

SpaceX’s CapEx climbed to $18.4 billion in the second quarter from $10.1 billion in Q1, with approximately $15.8 billion earmarked for AI infrastructure and data center expansion.

On a positive note, SpaceX has signed $6.7 billion in additional cloud/compute contracts since the end of Q2 and expects year-end compute capacity to exceed 2 gigawatts, suggesting the spending is tied to a rapidly expanding backlog rather than speculative capacity.

Still, concerns surrounding elevated spending, profitability, and post-IPO share volatility have continued to weigh on SPCX in the near term.

However, for long-term investors, those investments could ultimately position SpaceX to capitalize on multiple secular growth trends, including satellite internet, reusable launch systems, AI infrastructure, and space-based computing.

SpaceX still ended the quarter with roughly $24 billion in cash & equivalents and nearly $100 billion when including marketable securities, along with $192.8 billion in total assets compared to $65.6 billion in total liabilities, giving it one of the stronger balance sheets in the market despite its aggressive AI investment plans.

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Which Stock Looks More Attractive?

While it shouldn’t come as a surprise, Nvidia appears to offer the stronger combination of momentum and earnings visibility.

Demand for AI accelerators remains exceptionally strong, and the addition of SpaceX to Nvidia's growing list of strategic AI customers further extends an already dominant competitive advantage. If management delivers another strong quarterly report later this month, analysts could once again raise revenue and earnings estimates.

SpaceX, meanwhile, may appeal more to investors with a longer investment horizon and a higher risk tolerance.

To that point, SpaceX is still in the early innings as a newly public business, and its massive AI investments are pressuring near-term profitability. Nevertheless, management's willingness to invest aggressively today could create substantial value over the coming years if its ambitious AI and space infrastructure initiatives unfold as planned.

Bottom Line

Following their partnership announcement, Nvidia and SpaceX stock both offer compelling long-term stories, but they appeal to different types of investors.

Nvidia continues to benefit from industry-leading AI demand, expanding partnerships, and another potential earnings catalyst later this month. Meanwhile, the recent pullback in SpaceX stock may provide an attractive entry point for investors willing to look beyond near-term volatility after an encouraging first quarterly report as a public company.

From a fundamental perspective, Nvidia stock currently sports a Zacks Rank #2 (Buy), based on a pleasant trend of earnings estimate revisions, while SpaceX lands a Zacks Rank #3 (Hold).

Ultimately, Nvidia remains the stronger near-term investment, although SpaceX does offer intriguing longer-term rebound potential.

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This article originally published on Zacks Investment Research (zacks.com).

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