Key Points

Space and artificial intelligence (AI) represent two of the most promising growth areas in the defense sector.
SpaceX maintains a wide presence across both sectors and stands to capture substantial government contracts.
A high valuation could limit upside potential. At the same time, Lockheed Martin continues as a reliable player.
10 stocks we prefer over Space Exploration Technologies ›

Modern conflict extends well beyond traditional armaments. Therefore, evaluating defense investments requires considering multiple dimensions. One category includes established contractors such as Lockheed Martin (NYSE: LMT), known for supplying weapons platforms, vehicles, and advanced systems to the U.S. government and partner nations.

The contrasting option is Space Exploration Technologies (NASDAQ: SPCX), commonly called SpaceX. Although it does not produce armaments, its capabilities in AI and orbital launches are becoming essential to national security. Government customers contributed roughly one-fifth of SpaceX revenue during 2025.

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SpaceX holds clear strengths in orbital systems and AI, two domains expected to drive future defense expansion. Still, investors must determine which equity offers superior long-term value.

Image source: Getty Images.

Both firms possess substantial expansion prospects

Orbital technologies create multiple avenues for defense firms, such as satellite networks supporting communications and monitoring, space-based data facilities, and the Golden Dome initiative, a proposed multi-tiered shield that would deploy thousands of sensor- and interceptor-equipped satellites.

SpaceX supplies foundational capabilities in space and AI. It leads globally in launch services and delivers worldwide broadband via Starlink. Demand should remain elevated as federal satellite programs expand. SpaceX leadership views AI as its largest future market, and government interest is already evident. Recent filings showed U.S. forces employed AI tools from SpaceX's xAI unit during Operation Epic Fury in Iran.

Lockheed Martin brings decades of federal collaboration, highlighted by anti-missile solutions including NGI and THAAD interceptors, PAC-3 missiles, and the SBIRS early-warning network. The company's software, munitions, and sensing technologies are expected to feature prominently in Golden Dome components.

SpaceX's bold ambitions introduce notable risks

Elon Musk ranks among today's leading innovators, so SpaceX's expansive vision is unsurprising. Ahead of its IPO, the firm projected a combined market opportunity of $28.5 trillion across space, connectivity, and AI, with AI alone representing $26.5 trillion. The recent IPO generated roughly $85.7 billion in fresh funding, providing resources to pursue these objectives.

The accompanying enthusiasm has produced a valuation that increases investor risk. SpaceX now carries a market capitalization of $2.4 trillion, exceeding 120 times 2025 revenue. This pricing places it among the costliest equities available. Exceptional growth must materialize, or the shares may face pressure.

Lockheed Martin offers a lower ceiling yet greater stability

Lockheed Martin's trajectory ties closely to federal defense budgets. The United States will likely sustain spending to maintain its global position, ensuring ongoing demand for the company's land, sea, air, and space systems. Persistent budget deficits and electoral shifts, however, introduce variability. Overall, Lockheed Martin's upside remains more modest than SpaceX's.

Its valuation is far more reasonable. Because the company generates profits, investors can assess it on earnings. Analysts project 7% to 8% annualized earnings growth over the coming three to five years, supporting a multiple of 17 times 2026 estimates. Shareholders also receive a 2.7% dividend yield that enhances total returns.

SpaceX presents a more dynamic profile and larger growth runway than Lockheed Martin. Yet successful investing depends equally on entry price. SpaceX may achieve remarkable milestones, but the current valuation leaves limited margin for investors. Should its shares decline, it could warrant renewed attention. At present, Lockheed Martin appears the stronger selection, including for extended horizons.

Should you purchase shares of Space Exploration Technologies today?

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Justin Pope holds no positions in the securities discussed. The Motley Fool recommends Lockheed Martin. The Motley Fool maintains a disclosure policy.

The perspectives expressed here belong to the author and may not align with those of Nasdaq, Inc.