Last week, SpaceX (SPCX +0.00%) disclosed a new cloud service agreement with Alphabet‘s (GOOGL 1.95%) (GOOG 2.23%) Google through an amendment to its Form S-1. Demonstrating an ability to monetize artificial intelligence (AI) infrastructure by supplying a hyperscaler marks an important expansion of SpaceX beyond rockets and satellites.
With a total contract value of nearly $30 billion, did SpaceX stock just become a no-brainer buy with its initial public offering (IPO) looming on June 12? Read on to find out.
Image source: Getty Images.
What are the key terms of SpaceX’s new deal with Google?
Per the agreement, SpaceX will supply Google with a cluster of 110,000 Nvidia GPUs in combination with associated hardware, including CPUs and memory solutions. Google will pay SpaceX $920 million per month between October 2026 and June 2029.
Capacity will ramp up through September, and if SpaceX is unable to meet that delivery target, then Google may terminate the deal after a one-month grace period or accept a reduced allocation of chips with a corresponding fee cut.
What does Google’s deal with SpaceX say about AI infrastructure more broadly?
Google’s decision to outsource capacity underscores how explosive demand for specialized compute truly is. For SpaceX, this contract validates an important strategic pivot: By leveraging its engineering expertise and existing AI resources, the company is proving it can become a serious player powering hyperscale AI data centers.
More broadly, I think the deal showcases that AI infrastructure platforms are becoming more diversified as non-traditional providers deliver GPU clusters quickly and at scale.
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Does SpaceX’s deal with Google make the upcoming IPO a buy?
At roughly $11 billion over the contract’s primary term — and nearly $30.4 billion over its entire life — the Google deal could be seen as a much-needed financial milestone that de-risks SpaceX’s capital-intensive rocket and satellite operation.
Smart investors will weigh all of the execution risks, including intense competition in the cloud computing landscape and how SpaceX’s core operations across rocket launch services and Starlink connectivity remain central to its overall valuation profile.
While the partnership with Google adds tangible credibility and predictable cash flow that could strengthen the case for long-term holders of SpaceX stock, this deal alone is not a reason to buy the IPO this week.
I say this because either party can exit the deal with 90 days’ notice after December. This is important to note because Google Cloud has been aggressively marketing its own custom silicon — dubbed Tensor Processing Units (TPUs). Although this is speculation on my part, renting capacity from SpaceX could simply be Google’s way of accessing compute at a lower total cost of ownership compared to buying GPUs directly from Nvidia, all while ramping up its next batch of TPU deployments.
In other words, the deal could wind up being relatively short-term if Google is able to transition more of its training and inference workloads back to TPUs or its own existing infrastructure — making SpaceX more of a bridge than a long-term partner.
