If I Had $1,000 to Invest Today, Here’s the Trillion-Dollar Stock I’d Buy Instead of SpaceX

Elon Musk’s Space Exploration Technologies (SPCX +1.23%) went public in June. Its stock quickly soared to a peak of $225 as investors clamoured to buy a slice of the company, but that enthusiasm quickly faded, and it has since lost 40% of its value.

Its valuation might explain why. SpaceX still has a market capitalization of $1.83 trillion as I write this (Oct. 31), so based on the company’s trailing 12-month revenue of $32 billion, its stock trades at a sky-high price-to-sales (P/S) ratio of 57, making it eight times as expensive as the Nasdaq-100 index.

Therefore, although SpaceX is forecasting substantial revenue growth over the next few years, more downside might be on the horizon for its stock in the near term. I think investors can find better value elsewhere, so if I had $1,000 to deploy today, here’s why I’d buy Alphabet (GOOG -0.07%)(GOOGL -0.30%) stock instead.

Image source: Alphabet.

AI is transforming Google Search and Google Cloud

Alphabet is a technology conglomerate with a range of different businesses, but Google Search and Google Cloud are its most important. Search accounts for over half the company’s total revenue, whereas Cloud consistently delivers the fastest growth. More importantly, these businesses are at the center of Alphabet’s artificial intelligence (AI) strategy.

Google Search is evolving. Users no longer have to sift through web pages to find the information they need, because new features like AI Overviews and AI Mode provide them with comprehensive answers to their queries instantly. These features bridge the gap between the traditional search experience and the AI chatbot experience, and Alphabet says they are driving increased usage for Google Search overall.

In fact, search queries grew at the fastest year-over-year pace in five years during the third quarter of 2026 (ended Sept. 30), meaning users saw more ads, which allowed the platform to bring in more money. Google Search revenue actually set a quarterly record of $63.3 billion during Q3, up 12% compared to the year-ago period. However, that was slightly short of Wall Street’s consensus forecast, which contributed to a sharp correction in Alphabet stock.

GOOGL – Alphabet

$278.99-$0.85 (-0.30%)

NASDAQ · As of 4:00 PM ET 11/02/26

Google Cloud, on the other hand, topped Wall Street’s expectations, with revenue exploding higher by 103% year over year to $30.7 billion. The platform benefited from the continued demand for data center computing capacity, ready-made foundation models, and development tools, which enterprises need to create and deploy AI software.

But Google Cloud ‘s growth story appears to be in the early innings, because the platform ended Q3 with an order backlog of $561 billion, which grew by a whopping 262% from the year-ago period. It was attributable to customers who were waiting for Alphabet to build more data centers so they can tap into the computing capacity, but part of it also came from customers who were awaiting delivery of the company’s custom chips.

Broadcom has helped Alphabet design and fabricate several generations of its tensor processing unit (TPU) data center chips for AI workloads. The latest 8t TPU offers 2.7 times better performance in training workloads than the previous generation, while the 8i offers an 80% improvement in inference price performance. Direct TPU sales could become a significant financial opportunity for Google Cloud.

Alphabet looks like a bargain compared to SpaceX

Alphabet stock is trading at a P/S ratio of 7.3, so it’s only slightly more expensive than the Nasdaq-100 index which has a P/S ratio of 6.6. However, it’s substantially cheaper than SpaceX by that valuation metric.

Plus, Alphabet is highly profitable, so we can value its stock using the more traditional price-to-earnings (P/E) ratio. Based on the company’s trailing 12-month earnings of $19.15 per share, its stock has a P/E ratio of just 14.7 – half the P/E of the Nasdaq-100 which is 29.5. In other words, Alphabet looks heavily undervalued right now.

However, the company’s second-quarter earnings received a massive one-off boost from its investment gains, primarily from its holding in SpaceX. Accounting rules required Alphabet to recognize the fair value of its SpaceX position after the company’s recent IPO, resulting in a one-off earnings benefit of over $90 billion — which had nothing to do with its operations.

Therefore, it’s disingenuous to value Alphabet based on its trailing earnings. However, Wall Street’s consensus estimate (provided by Yahoo! Finance) suggests the company could deliver earnings of $14.81 per share in 2027, placing its stock at a forward P/E of 19. Therefore, it’s still cheaper than the Nasdaq-100 which has a forward P/E of 21.1.

As a result, I think Alphabet stock has a much greater chance of delivering upside from here than SpaceX stock.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.