Cerebras Surged 68% on Its First Day of Trading. Here's What That Tells Us About SpaceX's Upcoming Monster IPO | The Motley Fool

Artificial intelligence (AI) stocks have driven the stock market higher in recent years -- and investors have piled into companies that have been on the market for decades, from Nvidia to Microsoft. But in recent times, investors have gotten the opportunity to get in on younger companies involved in the space, from CoreWeave last year to Cerebras Systems (CBRS 5.87%) earlier this month. This is through these companies' initial public offerings.

And next up may be SpaceX. The company owned by Elon Musk recently released its prospectus, and news reports indicate a roadshow will begin the week of June 8. This suggests an IPO could actually happen as soon as next month.

Investors clearly are eager to see how the SpaceX operation unfolds, particularly considering the IPO may be the biggest ever at almost $2 trillion. For some clues, we can look to Cerebras, which surged 68% in its first day of trading. Here's what that tells us about SpaceX's upcoming monster IPO.

So, first, a quick note about Cerebras. The company is a player in the AI chip space, rivaling leaders Nvidia, Advanced Micro Devices, and other tech giants. Cerebras has designed a chip that's 58 times bigger than an Nvidia chip, and the company says this large size allows for incredible memory bandwidth and speed. In fact, in certain situations, it's delivered much faster results than GPU-based systems.

All of this has translated into explosive revenue growth for Cerebras and even a $20 billion, multi-year contract with AI lab OpenAI. Though Cerebras still operates at a loss, this is pretty standard for a young company in the space as it invests to build out its technology and gain customers.

Investors clearly liked the story as the stock opened at $350 on May 14 -- higher than the IPO price of $185 -- and went on to jump 68% in that first day of trading.

Now, let's consider what that means for the SpaceX IPO. It's clear that investors are interested in new AI investing opportunities as well as opportunities to get involved in other exciting areas. SpaceX, with its businesses of rocket launches, AI, and satellite internet service, offers investors a cocktail of such technologies.

In fact, in its prospectus, SpaceX says it's "identified the largest actionable total addressable market in human history," at $28.5 trillion. This includes $370 billion in space opportunities, $1.6 trillion in connectivity, and more than $26 trillion in AI.

It's important to note, though, that profitability and the attainment of goals won't happen overnight -- and certain goals may not even be reached over time. SpaceX reminds investors of this: "Many of the innovative products and services described elsewhere in this prospectus may ultimately be unsuccessful and may require great expense, innovations not yet achieved or technologies not yet developed."

Meanwhile, SpaceX's revenue has been climbing, 79% from 2023 to reach $18 billion last year, but its merger with xAI earlier this year added a significant weight to the financial picture: The AI business delivered a loss from operations of more than $6 billion last year, and capital expenditures of more than $12 billion surpassed those of the company's other businesses. So, the bottom line is that AI investments may stand in the way of profitability in the quarters to come.

Though SpaceX is distinctly different from Cerebras, we can draw some parallels: Both are involved in the high-potential -- but high-investment -- business of AI and aren't yet profitable on an operational basis from this particular business. Though they involve risk, they also may offer growth investors the opportunity to get in on a new and exciting AI and general technology story.

Though these stocks may not be the best choices for every investor, aggressive investors may be intrigued. These investors who don't mind some risk and are looking for a new AI or tech bet clearly turned to Cerebras during its IPO, leading it to a huge initial gain. And we may see the same thing happen as SpaceX launches its record-breaking market launch.