Why Microsoft Is a Better Investment Than SpaceX Even at $5,000

Microsoft operates a series of rapidly growing businesses in the artificial intelligence industry, including its intelligent assistant Copilot, and yet its stock looks relatively cheap compared to other big-tech players like SpaceX. With a market capitalization of $2.8 trillion and just $19.3 billion in trailing-12-month revenue, SpaceX was trading at a sky-high price-to-sales ratio of 145, making it 20 times as expensive as the Nasdaq-100 technology index. On the other hand, Microsoft's stock trades at a price-to-earnings ratio of just 22.5, which is a steep discount to its 10-year average of 32.7, making it undervalued right now.

Furthermore, Microsoft has a huge advantage over most pure-play AI software companies because it has the distribution side sorted. Its Windows operating system alone powers over 1.6 billion monthly active devices worldwide, which gives Copilot an unprecedented amount of reach without the need for marketing or any other user acquisition costs. This is a huge financial opportunity for Microsoft, especially on the enterprise side, because organizations around the world pay for over 400 million 365 licenses for their employees, and as of the company's fiscal 2026 third quarter, enterprises had added Copilot to 20 million licenses, up by a whopping 250% year over year.

Additionally, Microsoft operates AI data centers worldwide, equipped with thousands of the latest chips and components from leading suppliers, including Nvidia and Advanced Micro Devices. Demand for computing capacity is off the charts, and Microsoft ended the third quarter with an eye-popping $627 billion order backlog from customers who were waiting for more data centers to come online. The company plans to double its global data center footprint over the next two years to help fulfill its enormous order backlog, which makes it possible for Azure's revenue growth to accelerate even further from here.

In contrast, SpaceX's valuation has been largely driven by hype and speculation, particularly around its space transportation and satellite internet connectivity services. While the company has made significant progress in recent years, its business model is still unproven and highly speculative, which makes it difficult to justify its current valuation. Microsoft, on the other hand, has a long track record of consistently delivering strong financial results and making strategic investments in emerging technologies like AI.

Overall, Microsoft's broad portfolio of software products, including Copilot and Azure, positions it well for long-term growth and success. Its undervalued stock and strong financial performance make it a compelling investment opportunity, and investors would be wise to consider it over SpaceX.

Based on Microsoft's trailing-12-month earnings of $16.79 per share, its stock trades at a price-to-earnings ratio of just 22.5, which is a steep discount to its 10-year average of 32.7. In contrast, SpaceX's stock trades at a price-to-earnings ratio of over 500, making it one of the most expensive stocks in the market. Microsoft's price-to-sales ratio of 8.9 is also substantially lower than SpaceX's ratio of 145, making it a more attractive investment opportunity.

In conclusion, Microsoft is a better investment than SpaceX even at $5,000. Its broad portfolio of software products, undervalued stock, and strong financial performance make it a compelling investment opportunity. Investors should consider Microsoft over SpaceX and take advantage of its long-term growth potential.

Ever feel like you've missed the boat on buying the most successful stocks? Our expert team of analysts issues a "Double Down" stock recommendation for companies that they think are about to pop, and right now, we're issuing "Double Down" alerts for three incredible companies available when you join Stock Advisor. Don't miss out on this opportunity to buy before it's too late.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. For exchange delays and terms of use, please read disclaimer.