Google to pay SpaceX $920 million a month for AI compute at xAI data centers

SpaceX has signed an agreement under which Google will pay $920 million a month for AI compute capacity, days before a planned initial public offering that is expected to raise record sums. The arrangement was disclosed in a regulatory filing on Friday.

What the filing says

According to the filing, Google will use about 110,000 Nvidia graphics processing units, along with central processors, memory and other components housed in SpaceX data centers. The agreement runs from October of this year through June 2029 at the $920 million monthly rate, with capacity ramping up through September at a reduced fee. SpaceX said that if it fails to deliver access to the committed amount of GPUs by September 30, 2026, Google can immediately end the agreement or accept the number of GPUs provided at a reduced fee after a one-month grace period. After this year, either party can terminate the deal with 90 days' notice.

Why Google wants the capacity

A Google Cloud spokesperson told CNBC by email that the deal was made "to ensure we have bridge capacity to meet surging customer demand for our agent platform, Gemini Enterprise, which has been even higher than we expected". Google introduced Gemini Enterprise, a subscription offering for large businesses, in October.

The economics behind the deal

The Google agreement is the second massive infrastructure deal announced by SpaceX after its February merger with xAI, Elon Musk's artificial intelligence company, a transaction that valued the combined entity at $1.25 trillion. Last month Anthropic announced a deal to use all of SpaceX's compute capacity at its Colossus 1 data center in Memphis, Tennessee. SpaceX said in its prospectus that capital expenditures in the first quarter totaled $10.1 billion, more than doubling from a year earlier, with $7.7 billion of that committed to AI. The AI segment recorded an operating loss of $2.5 billion in the quarter on $818 million in revenue.

Alphabet, meanwhile, has made a windfall from backing SpaceX: Musk's company was worth $12 billion at the time of Google's 2015 investment and is aiming to go public next week at a valuation of over $1.75 trillion. Google is ramping up AI spending sharply, having revised its capital expenditure forecast for this year to between $180 billion and $190 billion, and Alphabet said this week that it plans to sell $85 billion in stock, including a $10 billion investment by Berkshire Hathaway, to meet "unprecedented customer demand". By leasing capacity, SpaceX also competes with a group of companies commonly called neoclouds, including CoreWeave and Nebius. Five years ago the two companies had a cloud deal with the roles reversed: Google agreed to supply computing and networking resources to SpaceX for Starlink, with ground stations installed in Google data centers.