The $920 million monthly deal that's changing the AI game

Google has agreed to pay $920 million per month to SpaceX for AI computing capacity, a deal that will run from October 2026 to June 2029. The contract marks a significant partnership between the two tech giants, with Google set to utilize approximately 110,000 Nvidia graphics processing units and other components housed within SpaceX data center facilities.

This deal comes just days before SpaceX's planned IPO, which aims for a valuation exceeding $1.75 trillion. The move is seen as a key step in SpaceX's efforts to establish itself as a major player in the AI sector, with the company's first-quarter capital expenditures reaching $10.1 billion, $7.7 billion of which was directed towards AI infrastructure.

However, the company's targeted valuation faces skepticism, with Morningstar analysts valuing it at roughly half. Morningstar equity analyst Nicolas Owens commented on SpaceX's AI efforts, stating, 'We don't see Grok as one of the leading AI labs today.'

An echo of Sydney's 2024 institutional buy-up

The deal marks a significant shift in the AI computing landscape, with Google set to utilize SpaceX's data center facilities to meet surging customer demand for its AI platform, Gemini Enterprise. Launched in October 2021, Gemini Enterprise has seen rapid growth, with Google looking to ensure it has the necessary infrastructure in place to meet demand.

The contrract is the second major infrastructure agreement disclosed by SpaceX since merging with xAI in February, following Anthropic's plans to utilize all compute capacity at SpaceX's Colossus 1 data center in Memphis.

SpaceX's IPO, scheduled for Friday, aims to raise funds to further develop its AI capabilities, with the company's leadership focusing on strengthening its AI narrative. However, the company's ability to deliver on its ambitious plans remains to be seen, with some analysts expressing skepticism about its valuation.

What auditors flagged in the May filing

The deal has raised questions about the potential impact on the American economy, with the AI sector expected to raise up to $4 trillion in IPOs in the coming months. The move is seen as a key step in the development of the AI sector, with Google and SpaceX set to play a major role in shaping its future.

However, the deal has also raised concerns about the potential risks associated with the rapid growth of the AI sector. With the sector expected to raise significant amounts of capital in the coming months, there are concerns about the potential impact on the economy and the ability of companies to deliver on their ambitious plans.