SpaceX Teams Up with Google for Major AI Deal Ahead of IPO
Elon Musk’s SpaceX has signed a significant infrastructure agreement with Google, just days before its anticipated IPO. The tech giant will pay $920 million monthly for AI computing capabilities.
According to regulatory documents, Google plans to utilize around 110,000 Nvidia graphics processing units, along with various other computing components, located within SpaceX’s data centers. The contract spans from October 2026 to June 2029 at nearly $1 billion per month, along with options for discounted rates before September.
A Google Cloud spokesperson mentioned that this arrangement was made to ensure adequate resources to meet rapidly rising customer demand for their AI platform, Gemini Enterprise. This subscription service for larger organizations was launched last October.
This deal marks the second substantial infrastructure arrangement SpaceX announced since merging with Musk’s AI venture, xAI, back in February, which valued the combined entity at approximately $1.25 trillion. Earlier in May, Anthropic also disclosed plans to leverage all computing resources at SpaceX’s Colossus 1 data center in Memphis, Tennessee. There was some confusion over this agreement due to Musk releasing terms that differed from the IPO documentation.
It’s interesting to note that Google has seen tremendous returns on its initial investment in SpaceX. When it invested back in 2015, the space and tech firm was valued at only $12 billion. Now, SpaceX is aiming for a public market valuation exceeding $1.75 trillion during its upcoming IPO.
Musk seems intent on emphasizing SpaceX’s AI capabilities ahead of the IPO, showcasing the advantages of their substantial investments in data centers, particularly around Memphis. The prospectus indicates that capital expenditures hit $10.1 billion in the first quarter—more than double the previous year’s figures—with $7.7 billion allocated specifically for AI infrastructure.
However, there are concerns surrounding SpaceX’s lofty valuation of $1.75 trillion. Morningstar, a financial services firm, has appraised the company at about half that amount.
With a projected revenue of $18.67 billion in 2025, SpaceX’s valuation would give it a low price-to-earnings ratio of 93.7 times. Morningstar analysts believe the company is significantly overvalued, rating its sales at $780 billion, roughly half of the IPO target. Morningstar’s equity analyst, Nicholas Owens, commented on the company’s AI efforts, stating, “We do not view Grok as one of today’s leading AI labs,” and suggested that an IPO could present an opportunity to buy shares at a more attractive price later on.
This investment is as much about Musk himself as it is about SpaceX for many investors. His track record with Tesla and ability to engage retail investors could drive strong demand for the stock, as it has in previous ventures.
With AI-focused IPOs anticipated to generate up to $4 trillion in the near future, it’s evident that artificial intelligence is significantly influencing the U.S. economy. Some argue the need to develop a comprehensive plan for leveraging the benefits of AI while dodging potential pitfalls.
