The tech industry has given SpaceX a new media thumbs up just days before the company’s much-anticipated debut on the US stock market. The company announced on Friday that it has signed a multi-year contract to supply Alphabet’s Google with a continuous supply of computing power that will power everything from the use of its satellites to artificial intelligence workloads. This agreement comes at a time when SpaceX has been known to push the limits in the physical world and now, it’s time for the digital and AI realm.
The agreement calls for Google to pay SpaceX a jaw-dropping nine hundred and twenty million dollars per month since October of this year until June of 2029. The agreement has a ramp-up period, with the capacity gradually being increased until September and then the monthly fee is applicable. The space company said all this in a regulatory filing, providing a first-of-its-kind glimpse at the financial nuts and bolts of one of the most anticipated private firms to go public.
So what exactly is Google getting for its almost $1 billion a month? The compute capacity offered features just about one hundred and ten thousand Nvidia GPUs, CPUs, memory and other components. For comparison, that’s more raw processing power than many mid sized cloud providers have overall. This isn’t simply a matter of running some extra simulations and taking in more Starlink data. The idea here is to establish a base for the type of AI models and real-time analytics that many companies outside of the giants find too daunting to attempt.
The interesting part of this partnership is that Google is not alone in having a big name on their doorstep at SpaceX. The deal comes hot on the heels of an agreement with Anthropic, the AI company behind the Claude chatbot. In May, Anthropic said it would put all of SpaceX’s computing power in Memphis, Tennessee’s Colossus 1 facility to work. That plant will contain over two hundred and twenty thousand Nvidia processors and will provide Anthropic three hundred megawatts of new power within a month of its release.
“Put together, it is an eye opener.” SpaceX’s annual compute agreements with Anthropic and Google have a combined value of approximately $26 billion. But when both contracts are still in force at the time the other is up for renewal, the total cost of both contracts reaches over seventy billion dollars. This is not a revenue. This is a story. Instead of being a rocket company that launches satellites, SpaceX is slowly becoming a relevant infrastructure company in the AI economy.
Strategically this is a no-brainer. SpaceX has been expanding its own massive capacity in the data centers it owns, whether it be for network management on Starlink or spacecraft telemetry or simulation. Renting that underutilized or unused capacity to companies such as AI providers Anthropic and cloud providers Google converts a one-off expense into a regular income. It also provides SpaceX with some insurance against the risks of delayed or cancelled launch contracts due to readiness of payloads, weather conditions, geopolitical factors, or other reasons. By contrast, AI compute demand hasn’t slowed, however.
Also the timing is important. SpaceX is reportedly aiming for a $75 billion valuation in its upcoming IPO. Two anchor customers of the magnitude have two long-term contracts in hand that will send a strong message to prospective investors. It shows recurring revenue, strategic partnerships with industry leaders, and a clear path to profitability beyond the high profile but unpredictable business of launching rockets.
But it’s not everyone who is dancing the jigs with great joy. There have been some who have noted that these deals also consolidate a huge amount of computing resources into the hands of a handful of companies. Google is already an eco-dominant player in cloud AI infrastructure. Amazon is just one of the big backers of Anthropic. Meanwhile, Elon Musk — who has been working on his own AI project called xAI alongside SpaceX — is the one in charge of SpaceX. The use of the terms customer, competitor, and partner are becoming increasingly ambiguous.
One question remaining is whether SpaceX will be able to provide the compute power it advertised and still run its primary space operations. On paper, the Colossus 1 is impressive, but large-scale AI infrastructure is always fraught with cooling problems, power limitations, and delays in the supply chain for special components such as Nvidia GPUs. Even a few months of lag time in increasing capacity could have billions of dollars of contracted payments at stake.
Then there’s the issue of how the public views that. SpaceX has been a constant wonder for many reasons, including its landing of rockets on drone ships and its astronauts on the International Space Station. The transition to Businesses using AI compute leasing is like a whole new business model! But some space fans have been asking themselves if this is a sign that the launch industry isn’t developing the way SpaceX is hoping it will, or whether they think there are diminishing returns in space for SpaceX that they are making up for on the ground.
