<p>Only five U.S. companies have market caps of more than $2 trillion. That number will soon increase to six. Elon Musk's SpaceX is targeting a valuation of more than $2 trillion when it goes public later this year, making it the highest-valued IPO stock ever.</p>
<p>However, the company that has been Musk's biggest success story so far -- <strong>Tesla</strong> <span class="ticker-mention inline-flex items-center font-bold">(TSLA <span class="ml-1 text-green-900">+0.91%</span>)</span> -- isn't a member of the $2 trillion club. Is SpaceX really worth more than Tesla?</p>
<div><img width="880" height="587" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84NjQyOTgvcm9ja2V0LWRyYXduLXdpdGgtYmVuLWZyYW5rbGluLWZyb20tMTAwLWJpbGwuanBnJnc9Mzg0MA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84NjQyOTgvcm9ja2V0LWRyYXduLXdpdGgtYmVuLWZyYW5rbGluLWZyb20tMTAwLWJpbGwuanBnJnc9Mzg0MA"/>
<p>Image source: Getty Images.</p>
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<h2>Why SpaceX might deserve a higher valuation than Tesla</h2>
<p>SpaceX focuses on three businesses. Each has enormous growth potential. </p>
<p>The company's Starlink satellite internet service has more than 3 million subscribers globally and continues to grow. It's already highly profitable, generating a reported $8 billion in earnings last year. Starlink offers strong recurring revenue, which usually boosts valuation multiples. </p><div><div id="foolcom_sidebar_top_container"></div></div>
<p>Starlink's total addressable market is huge. Billions of people worldwide lack reliable internet access. Cruise liners and aircraft that aren't always in reach of cell towers are also key markets for the satellite internet service.</p><div></div>
<p>SpaceX also dominates the commercial launch market with its reusable rockets. Customers include NASA, the U.S. Department of Defense, and spy agencies. Musk's goal is for SpaceX to colonize Mars. His company's Starship spacecraft could help make his vision a reality. It's designed to carry crew and cargo beyond Earth's orbit. SpaceX's potential to commercialize space represents its biggest long-term revenue opportunity.</p><div><div id="in_line_article_pitch_container"></div></div>
<p>In addition, Musk recently merged his AI-focused company, xAI, with SpaceX. xAI's flagship product is Grok, a powerful large language model. xAI might seem to be a questionable fit for SpaceX. However, Musk believes that terrestrial solutions won't be enough to meet the growing electricity demand for AI systems. In his view, space-based AI powered by solar energy is more scalable than Earth-based data centers. </p>
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<p>For investors who prioritize long-term disruption and total addressable market, SpaceX's target valuation of over $2 trillion might not seem too high. And the space stock could be more attractive than Tesla, which faces electric vehicle (EV) fatigue and declining sales.</p>
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<h2>Why Tesla could still be worth more</h2>
<p>However, SpaceX's valuation is harder to justify on fundamental grounds. Despite its problems, Tesla continues to generate strong free cash flow ($6.2 billion last year). The company's financial base is much more mature than SpaceX's. </p>
<p>To be sure, Tesla faces more intense competition than ever in the EV market. The company doesn't have the pricing power that it once had. Still, it would be premature to write off Tesla's EV prospects, especially amid soaring gas prices.</p>
<section><div><div><div><small><div>Expand</div></small></div><div><img alt="Tesla Stock Quote" width="64" height="64" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL1RTTEEucG5nJnc9MTI4?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL1RTTEEucG5nJnc9MTI4"/></div><div><h2>NASDAQ: TSLA</h2><div>Tesla</div></div></div><div><div><div>Today's Change</div><div>(0.91%) $3.14</div><div>Current Price</div><div>$348.76</div></div><div></div></div></div><div><div></div><div><h3>Key Data Points</h3><div><div>Market Cap</div><div>$1.3T</div><div>Day's Range</div><div>$342.74 - $350.34</div><div>52wk Range</div><div>$222.79 - $498.83</div><div>Volume</div><div>2.6M</div><div>Avg Vol</div><div>62M</div><div>Gross Margin</div><div>18.03%</div></div></div></div></section>
<p>More importantly, Tesla's fortunes don't hinge entirely on selling EVs. The company could have a huge opportunity in the robotaxi market. Tesla's big competitive advantages are cost and scalability. Its self-driving technology relies only on computer vision and doesn't require expensive LiDAR systems. Every Tesla vehicle equipped with its FSD (Full Self-Driving) software could, in theory, be used for autonomous ride-hailing.</p>
<p>Tesla also ranks among the top robotics stocks. Musk predicts that the company's Optimus humanoid robot will be &#34;the biggest product ever.&#34; He stated last year, &#34;I do think if Tesla continues to execute well with vehicle autonomy and humanoid robot autonomy, it will be the most valuable company in the world.&#34; </p>
<p>Even if you think Musk is being way overoptimistic, there's still a case to be made that Tesla should be valued more than SpaceX based on traditional financial metrics.</p>
<h2>The unvarnished truth</h2>
<p>Is SpaceX really worth more than Tesla? The unvarnished truth is that it depends on which factors you weigh more heavily. </p>
<p>SpaceX arguably has a higher upside potential than Tesla, but it comes with greater uncertainty. Tesla has a track record of success but faces real challenges. Both companies are closely linked to Musk, which has both pluses and minuses. Both could be worth more -- or less -- than their current valuations suggest. </p>
<p>Perhaps the best answer to whether or not SpaceX is worth more than Tesla or vice versa is that we'll have to wait and see. </p>
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<p>Elon Musk's SpaceX aims for a valuation exceeding $2 trillion in its upcoming IPO, potentially surpassing Tesla, which currently has a market cap of $1.3 trillion. SpaceX's growth is driven by its Starlink satellite service, commercial launch dominance, and ambitions for space colonization. However, Tesla remains financially robust with strong cash flow and opportunities in the robotaxi market. The valuation debate hinges on growth potential versus established financial metrics, with both companies facing unique challenges and uncertainties.</p>

- Five U.S. companies currently have market caps exceeding $2 trillion, a figure projected to grow to six with SpaceX's anticipated public offering, aiming for a $2 trillion valuation.  
- SpaceX boasts significant growth opportunities through its Starlink service, commercial launch dominance, and potential in space-based AI, while Tesla remains strong in cash flow and emerging markets like robotaxis, despite competition.  
- The valuation debate between SpaceX and Tesla reflects differences in risk and growth potential, with investors needing to consider various factors before drawing conclusions.

Is SpaceX Really Worth More Than Tesla? Here's the Unvarnished Truth.