What goes up can come down. We're seeing that axiom play out with Space Exploration Technologies (SPCX 5.41%), better known as SpaceX. Shares of the space technology company skyrocketed immediately after its record-setting IPO. In recent weeks, though, SpaceX stock has plunged more than 30% below its peak.
However, SpaceX still boasts a market cap of over $1.7 trillion. I think there's a chance that it could grow much larger over the next decade. In fact, I predict that SpaceX stock could be worth a whopping $5 trillion or more -- if one thing happens.
Image source: Getty Images.
Putting the cloud into orbit
SpaceX's crown jewel right now is its Starlink satellite internet services unit. You could make a pretty good argument that SpaceX could reach a market cap of $5 trillion if Starlink fulfills its potential and disrupts the businesses of telecom giants such as AT&T (T 0.77%) and Verizon (VZ 0.66%). However, I'm not convinced that's going to happen.
Interestingly, though, Starlink accounts for only around $1.6 trillion of SpaceX's estimated $28.5 trillion total addressable market. Most of that staggering amount, roughly $26.5 trillion, is related to artificial intelligence (AI).
SpaceXAI, formerly xAI, has already notched some big wins providing computing capacity for AI applications. For example, Anthropic is paying $1.25 billion per month for using SpaceXAI's data center near Memphis, Tennessee. Alphabet's (GOOG 2.17%) (GOOGL 2.05%) Google Cloud is paying $920 million per month for compute capacity.
But I think that the biggest opportunity for SpaceX is processing AI workloads in space. And that's exactly what the company hopes to do with its Starmind initiative. SpaceX wants to build a constellation of up to 1 million satellites to run AI applications and beam the results back to Earth.
The advantages of space-based AI processing are impressive. Free power from always available sunlight. Significantly lower cooling requirements than in terrestrial data centers, since heat radiates into space. No protests against data centers near residential areas.
NASDAQ: SPCX
Key Data Points
A $5 trillion+ valuation is possible.
Could SpaceX really achieve a valuation of $5 trillion if Starmind works? I think it's possible.
Granted, the largest AI cloud provider, Amazon Web Services (AWS) (AMZN 0.91%), currently has an annualized revenue run rate of around $150 billion. SpaceX would have to make a lot more than that to deserve a market cap of $5 trillion.
However, Starmind's lower costs could create demand that doesn't exist today. And no company is better positioned to make space-based AI processing a reality than SpaceX.
The technological hurdles are still daunting, though. I suspect they'll be resolved, but it could take years. Investors betting on SpaceX hitting the $5 trillion market might have to wait a while.
