Cathie Wood Keeps Buying SpaceX Stock. Here's Why I Wouldn't Buy It Above a $1.8 Trillion Valuation.

When Space Exploration Technologies Corp. (NASDAQ: SPCX) went public on June 12 in the largest initial public offiering (IPO) in history, there were so many investors vying for shares that the stock finished the day above $160, despite its initial pricing of just $135.

One of those buyers -- a big one -- was tech investor and longtime Tesla bull Cathie Wood. Her firm, Ark Invest, picked up SpaceX shares across four of its exchange-traded funds (ETFs) on IPO day and has continued to buy since.

According to Wood, SpaceX "could become the most important company in history." That's quite an endorsement, even from an investor like Wood who's never shied away from bold predictions.

I don't agree. SpaceX may very well make history, but that doesn't make the stock a good investment. My problem is how much investors are already being asked to pay for a future that is far from certain.

Starlink revenue hit $4.3 billion in Q2 2026 at a 38.6% operating margin

The bull case for SpaceX is not hard to see: Starlink is already an incredible business, with connectivity revenue reaching $4.3 billion in the second quarter, operating margins improving to 38.6%, and subscribers doubling year over year (YoY). Starlink is seriously impressive, and it's a key reason I don't dismiss SpaceX's valuation out of hand.

You also have launch, which dominates the field, sending more than 80% of the world's mass to orbit, according to Motley Fool Research. Starship, its next-generation rocket, could push that advantage even further: a single launch is designed to deliver 20 times the Starlink capacity of a Falcon 9, which could make it much cheaper for SpaceX to keep adding connectivity capacity.

Of course, "if Starship works as planned" is doing work here, given it's still in development and the project has been plagued with delays and cost overruns.

SpaceX burned $25 billion in free cash flow in the first half of 2026

Here's my biggest problem: cash.

Free cash flow (FCF) -- cash from operations minus everything SpaceX spends on capital projects -- came in at a whopping negative $25 billion in just the first half of 2026. That's not necessarily a problem for a company investing heavily in potentially lucrative markets.

But unfortunately, most of that is flowing into its AI division, whose ability to deliver a return on that investment long term is doubtful, in my view. Yes, in the short term, that investment is helping fuel insane sales growth. AI revenue went from $818 million to $2.6 billion in just one quarter after the company began serving its compute to Anthropic.

But it's easy to see that jump and ignore the fact that the AI segment spent nearly $16 billion in capex alone during that same period. This doesn't need to be a problem if that spend trends down over time while revenue keeps rising. That's the point of capex. It's an investment -- spend $1 today to earn $2 tomorrow.

The problem is that the normal capex cycles that you expect in other businesses may not play out in AI. That is, SpaceXAI's capex could end up looking a lot more like an operational expense as time goes on -- a constant need that never really diminishes.

Now, if the scale of this were different, maybe it wouldn't matter too much, but we're talking about almost 90% of the company's investments here. This is not a side project.

The fate of SpaceX is, in large part, the fate of SpaceXAI.

Why SpaceX stock isn't a buy above $1.8 trillion

That is why, for my money, SpaceX stock is not a buy. An innovative rocket program and a potentially game-changing satellite business aren't enough to overshadow the cash-burning AI division -- at least when you're asking me to value the entire company at more than $1.8 trillion.

Cathie Wood's buying doesn't change that for me. And frankly, I wouldn't let it change that for you either. Wood has made some spectacular calls over the years, but following her blindly would have also been a painful strategy. Her flagship fund, the Ark Innovation ETF, is down more than 25% during the past five years while the S&P 500 was on an historic run, gaining nearly 73%.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.