Buy This AI Stock to Own SpaceX Pre-IPO and Hold It Through the Robotaxi Boom | The Motley Fool

Alphabet's Waymo is the market leader in autonomous ridesharing, a market projected to increase at 99% annually through 2033.

SpaceX is an aerospace manufacturer and satellite-internet service provider. The company is well known for Starship, a fully reusable orbital rocket designed for interplanetary travel. It is also well known for Starlink, a constellation of low-Earth orbit satellites that provide high-speed internet access around the globe.

SpaceX recently filed initial public offering (IPO) paperwork with the SEC and plans to host an IPO roadshow in early June, which means the stock will likely start trading on the public market this summer. But investors can get pre-IPO exposure to SpaceX now by purchasing shares of Alphabet (GOOGL +3.71%) (GOOG +3.44%).

Here are the important details.

In 2015, Alphabet invested $900 million in SpaceX, which gave it roughly a 7% equity stake in the rocket maker. Alphabet has already recouped that sum several times over. In fact, the company said unrealized gains from that equity stake added $8 billion to its profit in the first quarter of 2025 alone.

Importantly, SpaceX doubled in value in 2025. A secondary share sale raised its valuation to $800 billion in December, up from about $400 billion earlier in the year. That means Alphabet's stake was worth about $56 billion at the end of 2025.

SpaceX has since merged with xAI, and the combined companies are reportedly targeting a $1.75 trillion IPO valuation. If that figure sticks, Alphabet's stake would be worth more than $120 billion, bringing the return on its initial $900 million investment to approximately 13,400%.

Here's the big picture: Alphabet owns about 7% of SpaceX, which means anyone that owns Alphabet stock has modest exposure to Elon Musk's rocket company. Now is a good time to buy because SpaceX's valuation is likely to soar after its IPO in the coming months, but also because Alphabet has other growth prospects and the stock trades at an attractive price.

Alphabet is investing aggressively in artificial intelligence products, and the return on those investments is particularly evident in its cloud computing business. Google Cloud revenue rose 48% in the fourth quarter, the third straight acceleration, driven by strong demand for its Gemini models and tensor processing units (TPUs).

TPUs are custom AI accelerators that serve as an alternative to Nvidia GPUs. Several major AI companies, including OpenAI, Anthropic, and Meta Platforms, have signed deals to use TPUs. While Nvidia still dominates the AI accelerator market, custom silicon is projected to gain share, reaching 24% of total accelerator sales by 2030, up from approximately 12% today, according to Morgan Stanley.

Elsewhere, Alphabet's Waymo is also the leader in autonomous ridesharing with robotaxis providing public rides in 11 major U.S. metropolitan areas. The company is also testing its vehicles in 20 more cities, including London and Tokyo. Morgan Stanely analysts estimate Waymo will account for 34% of autonomous vehicle trips annually by 2032, which would put it 9 percentage points ahead of second-place Tesla.

Wall Street estimates Alphabet's earnings will increase at 15% annually through 2029. That makes the current valuation of 28 times earnings look reasonable. But analysts have regularly underestimated the company in the past. Alphabet beat the consensus earnings estimate by an average of 15% over the last six quarters.

I think Wall Street is once again underestimating the company, not only because it owns a substantial stake in SpaceX ahead of what promises to be a blockbuster IPO, but also because it has compelling growth prospects in cloud computing and autonomous driving. Grand View Research estimates cloud spending will grow at 16% annually through 2033, while robotaxi revenue increases at 99% annually over the same period.