Elon Musk's space and artificial intelligence venture, SpaceX, has filed a document with the U.S. Securities and Exchange Commission (SEC), announcing a cloud services agreement with Alphabet (GOOGL.US) for access to computing capacity. This capacity includes approximately 110,000 Nvidia GPUs, along with CPUs, memory, and other related components.
Under the terms of the agreement, Alphabet has committed to paying SpaceX $920 million per month from October 2026 through June 2029, amounting to a total of $29.44 billion over the 32-month period. The filing stipulates that if SpaceX fails to deliver the promised quantity of GPUs by September 30, 2026, Alphabet may, after a one-month grace period, immediately terminate the agreement or accept the delivered quantity and proportionally reduce its monthly payments. After December 31, 2026, either party may terminate the agreement with 90 days' notice. Alphabet will retain ownership and intellectual property rights over its content, AI models, and related data.
A Google Cloud spokesperson stated that this agreement will help the company meet the demands of its AI services. In its latest earnings report, Google Cloud's backlog—the value of signed contracts not yet recognized as revenue—nearly doubled from the previous quarter, exceeding $460 billion. The spokesperson noted in a statement: "This is a short-term, timely agreement to ensure we have transitional capacity to meet the surging customer demand for our AI agent platform, Gemini Enterprise, which is even higher than we anticipated."
While xAI's AI models currently trail competitors in programming capabilities, the company is betting on its strength in data center infrastructure. The three-year-old firm is building a data center in Memphis, Tennessee, and is expanding related facilities in Mississippi. Previously, SpaceX had signed a similar agreement with Anthropic. Under that deal, Anthropic agreed to pay xAI $1.25 billion per month from the signing date until May 2029 to access computing capacity from the Colossus and Colossus II data center clusters in Memphis, Tennessee. Although Musk later clarified that SpaceX only agreed to lease the Colossus AI training cluster to Anthropic for six months, he added that the agreement "has the potential" to be extended for several years. Beyond Anthropic, xAI also reached a cooperation deal in April with the programming tool startup Cursor to provide it with large-scale computing support.
The relationship between Alphabet and SpaceX is both cooperative and competitive, with competition primarily centered on AI models. Earlier this year, SpaceX disclosed that as of the end of 2025, Alphabet held a 6.11% stake in the company. Following the merger of SpaceX with Musk's AI and social media company xAI in February of this year, it is estimated that Alphabet currently holds approximately a 5% stake in the combined entity. Sources indicated in May that the cloud services agreement is not the only collaborative project under discussion between the two companies. They have also reportedly discussed launching related equipment for Alphabet's orbital data center testing project. Alphabet has previously stated it is exploring opportunities with other launch service providers to advance its initiative, known as Project Suncatcher.
SpaceX has been seeking to diversify its revenue streams through its subsidiary xAI and transform its AI business into a provider of computing infrastructure—a core business it is highlighting to investors as part of its initial public offering (IPO) process. As a new entrant in the large language model field, xAI is in a phase of intense research and development investment, with monthly operating losses exceeding $300 million and a net loss surpassing $4 billion in 2025, with profitability not expected in the near term. There is widespread market concern that following this acquisition, xAI's massive cash burn will be consolidated into SpaceX's financial statements, potentially diluting the profitability of the Starlink business. This could lead to a scenario where a public company is effectively funding Musk's personal ventures, potentially harming the interests of public shareholders.
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