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The race to become the world's first $5 trillion company has some familiar contenders. Nvidia and Apple have already reached that mark (although both have since pulled back), and Microsoft and Alphabet are among the technology giants hoping that artificial intelligence (AI) will propel their market capitalizations to previously unimaginable heights.
But another company deserves a place in that conversation, and it's the new kid on the block: Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, which just had its IPO in June.
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Elon Musk's rocket and satellite company has become a major player in AI infrastructure, and its recent financial results suggest that business is growing at an extraordinary pace. Add the possibility of a merger with Tesla (NASDAQ: TSLA), and SpaceX could have a credible path to a $5 trillion valuation by 2029.
SpaceX went public in June, raising a record $85.7 billion in the largest initial public offering (IPO) in history. The company is best known for its rockets and Starlink satellite communications network, but artificial intelligence has become its biggest business.
In the third quarter, SpaceX reported revenue of $14.6 billion, a whopping 161% increase from a year earlier. Net income reached $4.4 billion, reversing a $1.1 billion loss in the year-ago quarter.
But the most interesting number came from SpaceX's AI division, which the company now calls super intelligence. The division generated $7.56 billion in third-quarter revenue, surpassing the $5.25 billion produced by its connectivity business, which includes Starlink.
That's an impressive achievement for a company whose AI operations were losing billions of dollars just a year ago.
SpaceX has been investing aggressively in the computing infrastructure needed to train and operate AI models. Its capital expenditures reached $19.6 billion during the third quarter, reflecting the enormous cost of building that capacity.
And there's evidence that customers are willing to pay for it. In June, SpaceX announced an agreement worth up to $6.3 billion with Reflection AI, an AI start-up developing open-source models. The arrangement gives Reflection access to powerful Nvidia chips at SpaceX's Colossus data center in Tennessee.
The contract includes termination provisions, so its full value isn't guaranteed. Still, it demonstrates how SpaceX can turn its computing investments into revenue from outside customers.
SpaceX's AI growth alone makes it a viable candidate to eventually reach the $5 trillion mark. But I think another development could accelerate its path to that milestone. In October, Musk announced that SpaceX and Tesla had established independent committees to explore a potential merger. Musk isn't participating in the negotiations because his ownership stakes in both companies create a conflict of interest, but the logic behind combining the companies is compelling.
Tesla is an electric vehicle company with aspirations to be much more. The company derives most of its revenue from EVs, but it's investing heavily in developing autonomous vehicles and humanoid robots. SpaceX has the computing infrastructure and AI capabilities needed to support those ambitions.
Together, the companies could develop AI models, train them using their own infrastructure, and deploy them through Tesla's vehicles and Optimus robots.
There's also a financial argument. SpaceX's market cap is $1.8 trillion, while Tesla comes in at $1.6 trillion. That puts their combined market value near $3.4 trillion before accounting for any merger-related adjustments. Reaching $5 trillion would require approximately 47% appreciation from that combined valuation.
That's an ambitious target, particularly over the next three years. But it's considerably more achievable than asking SpaceX to nearly triple its market capitalization on its own.
A merger isn't guaranteed, and combining two enormous companies would create complications for shareholders. Both businesses are making substantial investments in technologies that haven't yet demonstrated their full profit potential.
But SpaceX has something many aspiring AI companies still lack: a rapidly growing business generating billions of dollars in quarterly revenue, alongside established rocket and satellite operations.
Its AI division is becoming an increasingly important source of sales, while a potential merger with Tesla could create a company with enormous opportunities in computing, autonomous vehicles, and robotics.
The $5 trillion target is aggressive. But with SpaceX's AI business growing rapidly and what I think is an inevitable merger that could substantially increase its market capitalization, I believe the company has a realistic opportunity to reach that milestone by 2029.
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Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, Nvidia, Space Exploration Technologies, and Tesla. The Motley Fool has a disclosure policy.
1 Unstoppable Artificial Intelligence (AI) Stock Poised to Join the $5 Trillion Club by 2029 was originally published by The Motley Fool
