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Written by Ryan Vanzo for The Motley Fool->
Expect SpaceX to invest heavily into xAI, its AI division.
Tesla's self-driving technology should benefit from increased xAI spending.
Expect competing robotaxi operators to secure deals with Rivian.
SpaceX is about to make history by going public at a massive valuation. Experts agree that the space stock will target a valuation between $1.5 trillion and $2 trillion, with $50 billion to $75 billion in fresh capital raised through the initial public offering (IPO). Most of the time, big IPO stocks like this reserve very few shares for the public. But reports suggest that founder Elon Musk wants to reserve up to 30% of shares for retail investors, allowing the general public easy access to invest in SpaceX.
The best approach may be to find stocks that will benefit from SpaceX's new capital hoard. After the IPO, expect the company to invest its new riches aggressively in growth projects. I've already identified a few stocks that should benefit from SpaceX's upcoming spending spree. But there's one obvious benefactor not on previous lists: Rivian (NASDAQ: RIVN).
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Rivian, of course, is a direct competitor to Tesla (NASDAQ: TSLA), another Musk-led business. How exactly will the company benefit from a SpaceX IPO? There's one growth catalyst in particular for Rivian that the SpaceX IPO should accelerate over the next six to 12 months.
I'm a big fan of Rivian stock for several reasons. But perhaps the most exciting growth catalyst for the company moving forward is its mounting investments in artificial intelligence (AI) and self-driving technology. Last December, the company held its first "AI Day." Shares hit multimonth highs during this time period. And it's no wonder. Tesla's $1.2 trillion market cap is due, in large part, to its robotaxi growth potential, which some believe will eventually be a $5 trillion to $10 trillion global opportunity. If Rivian can target similar opportunities by maturing its self-driving capabilities, shares would likely get a significant boost.
It's hard to understate how transformational AI has been for vehicle autonomy. "As the growth in capability of trained neural networks has increased there have been many breakthroughs for artificial intelligence," concludes a report from Imagination Technologies, a semiconductor maker. "The self-driving car is, therefore, becoming a reality."
Tesla has already launched pilot versions of its robotaxi service in several metro markets. So have competing services operated by Alphabet Inc. and Uber Technologies. But Tesla has a huge advantage: It can produce its own vehicles at scale internally. Alphabet and Uber, meanwhile, need to source their cars from other manufacturers.
It's important to note that SpaceX owns xAI, Musk's AI start-up. Tesla, meanwhile, holds a minority position in xAI through a $2 billion investment earlier this year. xAI is spending heavily to advance its AI models, which Tesla can then use to advance its self-driving capacities. So more money for SpaceX means more money for xAI and ultimately, greater autonomy capabilities for Tesla.
If Tesla's self-driving visions are accelerated from a SpaceX IPO, expect robotaxi competitors like Alphabet and Uber to also ramp their investments. That increased investment will require increased spending on physical vehicles. Without physical vehicles, advances in software have limited value. We've already seen this start to happen. Earlier this year, Uber agreed to invest up to $1.25 billion in Rivian in exchange for up to 50,000 of the company's new R2 SUVs.
In summary, the SpaceX IPO could indirectly spark an inflection point for self-driving technology. Any robotaxi operator without internal manufacturing capabilities will be scrambling to ensure it can scale alongside Tesla's growth trajectory. This should all be good news for Rivian, especially given it is one of the only electric vehicle (EV) stocks with new, tech-heavy, affordable vehicles set to begin deliveries this year.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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