Back in January 2015, Google and Fidelity put $1 billion into SpaceX, a rocket company then valued at around $10 billion. Few people back then would have guessed that the same company would one day rent Google the chips behind its AI tools.
That is roughly where things stand now. Alphabet has been adding to its SpaceX position, while also paying Musk’s company every month for computing power. That makes Google’s parent both a shareholder and a paying customer, and the arrangement is starting to get complicated.
Alphabet keeps buying while SpaceX shares slide
The latest holdings update showed Alphabet’s SpaceX position rising to about 555 million shares, up from 551.2 million, according to Reuters. The same disclosure revealed a new Qualcomm stake worth nearly $548 million, built during the third quarter, indicating that Alphabet is spreading its bets across the AI hardware chain.
Also read: Goldman Sachs and Apollo changes position on SpaceX
The extra shares come after a rough patch for the stake. Alphabet reported holding about $94.1 billion in SpaceX stock at the end of June, with most of that position still subject to post-IPO selling restrictions, so the paper gain could not simply be cashed in.
Then SpaceX shares cooled off. Alphabet booked an $8.7 billion loss on equity securities in the third quarter, and finance chief Anat Ashkenazi said it was driven mainly by the drop in SpaceX stock, The Motley Fool reported. That loss shaved $0.55 off earnings per share, even though nothing was actually sold.
Wall Street did not take it well. Alphabet shares fell more than 12% in midday trading on Oct. 29 after the company missed revenue and profit forecasts and posted negative free cash flow. Even so, Alphabet chose to increase its stake rather than trim it, a sign that it still sees long-term value in Musk’s company despite the noise.
The GPU deal that makes Google a SpaceX customer
The second part of the relationship began in June. Google agreed to pay SpaceX $920 million a month for computing capacity at xAI’s data centers, a deal that came to light in a filing tied to SpaceX’s IPO, Reuters reported.
The contract runs from October 2026 through June 2029 and is worth roughly $30 billion in total, as reported by TheStreet. It covers about 110,000 Nvidia GPUs along with CPUs, memory and other parts, and Google is renting that capacity rather than buying the hardware.
Google framed the deal as a stopgap. It described the arrangement as bridge capacity to keep up with surging demand for its Gemini platform. The exit terms back that up, since either side can walk away with 90 days’ notice once 2026 is over.
Those GPUs exist because of a merger earlier this year. SpaceX took over xAI in an all-stock deal in February, folding Grok and the X platform into the rocket company. In other words, Google is now renting Musk’s AI hardware to serve Gemini, a direct rival to Grok.
Google Cloud is growing faster than it can build
The reason Google needs outside chips is simple. Google Cloud revenue climbed about 103% from a year earlier to $30.7 billion in the third quarter, TheStreet reported. The unit’s contracted backlog reached $561 billion, and management expects most of it to be recognized as revenue within about two years.
Alphabet is spending heavily to catch up on its own. It kept its full-year capital spending target at $195 billion to $205 billion and said spending will rise significantly again in 2027. New data centers take years to plan, power, and fill with chips, so rented GPUs help fill the gap until Google’s own buildings come online.
That spending comes at a price. Third-quarter capital expenditures hit about $51.4 billion, and free cash flow turned negative at roughly $9.1 billion. Every month of the SpaceX contract adds another large bill on top of that.
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This is why the SpaceX deal matters beyond the headline number. Each month at the full rate costs Google $920 million, according to TechCrunch, which works out to around $11 billion a year. Google is effectively betting that demand for Gemini will keep outrunning its capacity, and it is paying a rival’s AI arm so customers are not left waiting in the meantime.
The board exit and what investors watch next
Alphabet has also lost its seat at the table. Longtime Google executive Don Harrison has resigned from SpaceX’s board. SpaceX said the move did not stem from any disagreement over its operations or policies. Still, losing a board seat means Alphabet now has less direct visibility into a company that is both a major investment and a supplier.
Lockups are the next thing to watch. A large portion of Alphabet’s stake remains subject to short-term sale restrictions, while another tranche is locked up through roughly the third quarter of 2027. Part of the position became freely tradable at the end of September.
For now, Alphabet’s results will continue to move in tandem with SpaceX’s share price, for better or worse. The $8.7 billion third-quarter hit showed how quickly that can cut into reported profit. Investors will be watching whether Gemini demand grows fast enough to justify both the spending and the SpaceX bill, and whether Alphabet keeps adding shares once more of them are free to trade.
Related: Elon Musk sends a strong signal to SpaceX stock investors
