Key Points

Amazon, Microsoft, and Alphabet each operate successful cloud computing divisions.
All three equities trade at valuations well below that of SpaceX.
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The Space Exploration Technologies IPO, also known as SpaceX, has drawn significant investor interest centered on its potential future performance. Although this outlook holds appeal, several established firms already demonstrate clear paths to sustained success.

Cloud computing stands out as a sector with strong long-term prospects, positioning these three leaders as more reliable choices than SpaceX given their predictable growth trajectories.

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Cloud computing is thriving from the rising demand for AI

The leading cloud providers consist of Amazon, Microsoft, and Alphabet, ordered by the scale of their respective cloud operations. Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud represent mature, profitable segments built around a straightforward concept.

Though the underlying technology is sophisticated, the core model remains accessible. Companies construct data centers, deploy hardware, and lease processing capacity through cloud services.

This approach allows businesses to adjust computing resources flexibly while shifting the burden of maintaining costly, quickly obsolete equipment. It has also emerged as the main channel for AI startups seeking necessary processing power.

Moreover, these firms are investing substantially in data center expansion this year. Early estimates from the four major AI infrastructure players, including the trio plus Meta Platforms, projected roughly $650 billion in data center spending for 2026. Updated projections from Nvidia now place the total above $1 trillion, signaling robust expansion ahead.

Amazon CEO Andy Jassy highlighted in his shareholder letter that accelerated cloud growth requires increased investment to maintain momentum. With surging demand driving ongoing builds, revenue expansion for this group appears likely in coming years, supporting attractive long-term returns compared to SpaceX.

All three stocks are trading at a reasonable price tag

Evaluating businesses with heavy capital spending cycles benefits from focusing on operating cash flow, which excludes such outlays along with irregular items like tax adjustments or investment results to highlight core cash generation.

Under this lens, Amazon and Microsoft appear attractively valued relative to history, while Alphabet sits at a higher yet still sensible multiple.

MSFT Price to CFO Per Share (TTM) data by YCharts

SpaceX relies on adjusted earnings before interest, taxes, depreciation, and amortization for 2025, a metric distinct from operating cash flow and more forward-looking. Using this figure of $6.6 billion against its $2.5 trillion market capitalization yields a multiple of 379.

This exceeds the ratios for the cloud leaders, indicating these three offer accessible entry points while SpaceX requires substantial expansion to justify its current pricing. Consequently, these cloud-focused companies appear preferable, with potential to deliver superior results over the coming decade.

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Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. 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.