- SPCX
- RR.L
Somewhat confusingly, Rolls-Royce (LSE: RR.) shares and SpaceX (NASDAQ: SPCX) stock feature on both the ‘most popular buy’ and ‘most popular sell’ tables on several platforms. So, which is the better investment right now?
For a giggle, I decided to see what an AI bot thought. I can’t say I agreed with what it said.
On the upside…
To be fair, ChatGPT did manage to highlight some of the strengths of both companies. For example, it recognised that Rolls-Royce had “several powerful growth drivers” beyond its civil aerospace business. Tragically, ongoing armed conflicts and geopolitical tensions will do no harm to its defence division, for example.
The bot also touched on the fact that recent half-year results were excellent, pushing the company to raise its full-year outlook.
For SpaceX, it stated that the company’s growth potential was “extremely high“. It also commented on its “exceptional” competitive moat, highlighting its Starlink satellites and launch services.
Then again, there were a few things said by the AI bot that I’d question.
For one, it said that the risk attached to Rolls-Royce shares was ‘moderate’. With the shares currently trading on a price-to-earnings (P/E) ratio of 38, I beg to differ. To justify such a price tag, CEO Tufan Erginbilgiç needs to execute to perfection going forward.
Even if this comes to pass, I can see holders dumping the shares in the event of a market-wide correction or crash. This is always a drawback with high-performing but expensive growth stocks.
Back down to earth
With SpaceX, ChatGPT said that “the issue isn’t the business; it’s the price“. Actually, I think it’s both.
Even the most bullish of analysts conceded that the valuation slapped on Elon Musk’s company at IPO was ludicrous. Since then, we’ve seen some common sense prevail. But loss-making SpaceX still looks monstrously overvalued, even if it did just announce revenue of $7.8bn in its first quarterly report as a public company (beating expectations).
The fact that one of its rockets is now reported to have crashed into the moon doesn’t exactly inspire confidence that the stock will shoot back up in value either.
To be clear, prospective buyers should know that this is not primarily a space business; ironically, it’s an enormous bet on AI. And we know that the markets are getting increasingly skittish about whether that will pay out.
Conveniently, ChatGPT didn’t mention this. More worryingly, it estimated I could multiply my money between five and 10 times if things went well but neglected to say how it arrived at these multiples.
