This article first appeared on GuruFocus.
Alphabet (NASDAQ:GOOGL), the parent of Google and Google Cloud, rose roughly 0.5% Friday morning as investors discovered another monster asset hiding inside the Google empire. Alphabet owned 551.2 million SpaceX (NASDAQ:SPCX) shares at June 30, according to Reuters' analysis of public filings. At the quarter-end price, that stake was worth a jaw-dropping $94.2 billion. Alphabet originally put about $900 million into SpaceX in 2015. A decade later, that bet has turned into one of the most spectacular investments sitting on any mega-cap balance sheet.
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The number has come down, but the win is still enormous. SpaceX closed Thursday at $141.29, knocking Alphabet's stake down to roughly $77.9 billion from $94.2 billion at the end of June. That is a $16.3 billion swing in weeks. Sounds painfuluntil you remember Alphabet started with roughly $900 million. Even after the selloff, the position is worth about 86.5 times that original investment. SpaceX also remains 4.7% above its $135 June IPO price. This is no longer some interesting venture-capital side bet. It is a nearly $78 billion asset sitting alongside one of the most powerful advertising, cloud and AI businesses on the planet.
Here is where investors should slam the brakes. Alphabet's stock is already pricing in plenty of good news. GuruFocus puts the shares at $345.47 against a GF Value estimate of $248.98, meaning the stock trades 38.76% above GF Value. The SpaceX stake certainly makes Alphabet more valuable, but at roughly 1.8% of its $4.26 trillion market capitalization, it cannot carry the valuation by itself. Search, Google Cloud and AI still have to do the heavy lifting. Alphabet scored an extraordinary win with SpaceX. Now its core businesses need to prove that investors paying nearly 39% above GF Value are not getting too far ahead of the machine.