SpaceX, Google compute deal raises eyebrows ahead of IPO

As SpaceX’s (SPCX) June 12 initial public offering (IPO) approaches, the company has been securing some very lucrative AI compute deals, but the timing and terms of those deals are adding concern.

Last week, SpaceX said Alphabet’s (GOOGL) Google will pay $920 million per month to rent 110,000 Nvidia (NVDA) GPUs, CPUs, and memory, as well as related components, from October 2026 through June 2029, with computing capacity beginning to ramp in September 2026.

The filing comes after SpaceX agreed to rent GPU capacity at its Colossus 1 data center to Anthropic (ANTH.PVT) for $1.25 billion a month. Musk previously folded his xAI operation into SpaceX, creating a new subdivision called SpaceXAI that oversees AI efforts like the Grok chatbot and its data centers, such as Colossus.

Though these are three-year compute deals or thereabouts, each includes 90-day cancellation windows, and Musk suggested the Anthropic deal would be even shorter in duration.

In a filing last month, SpaceX revealed the lion’s share of its losses stemmed from its AI division, with costs accelerating in Q1. Signing these deals boosts revenue, at a time when SpaceX is looking to justify a rich valuation.

“I can safely say SpaceX is the first company to ever add $26 billion in ARR [annual run rate] between the date of its IPO filing with the SEC and the first trade,” said Epistrophy Capital Research chief market strategist Cory Johnson. “It’s a dramatic pivot of xAI from artificial intelligence provider to server farm. It’s as much as $2.17 billion per month… renting out data centers that Grok, xAI’s own AI model, couldn’t fill.”

That being said, adding $26 billion in additional yearly revenue to SpaceX takes its valuation from a 100x revenue proposition to around 40x, a better story for a still richly valued stock.

“SpaceX is all about making money,” countered Deepwater Asset Management’s Gene Munster. “The timing of the Google and Anthropic announcements aligns with Google and Anthropic’s compute needs. If they did not need the compute, they would not have signed up with SpaceX.”

Some have argued the big revenue deals help banks like Goldman Sachs market SpaceX’s valuation story. Goldman is the lead underwriter for the SpaceX IPO, charged with building the “book” of investors and large institutions who will buy SpaceX shares at the offer price of $135. The latest reporting suggests the SpaceX IPO is “well oversubscribed.”

Other commentators were not as generous.

“Together those two deals put about $26 billion a year on SpaceX’s books, right before an IPO where Goldman needs to justify a $1.75 trillion valuation on $322 billion in projected AI revenue,” said finance newsletter author Hedgie on X. “So now Google and Anthropic pay rent on the hardware Grok couldn’t use, and that rent is the AI revenue story SpaceX takes public on Thursday [the night the IPO prices].”

The investment bank’s brokerage side of the business will argue that these compute deals are positive for SpaceX overall, building the bullish story for the company.

“The broker community is now posting fairly aggressive revenue and earnings forecasts for SpaceX. This is typical for IPOs when brokers will argue for bigger allocations for their clients for the normal Day 1 pop after the IPO price is set,” Future Fund managing partner Gary Black said on X. Black expects demand to exceed supply for SpaceX’s IPO.

Another wrinkle is the vendor circular financing present in this deal. This case sees Google pay SpaceX for AI compute, which in turn helps SpaceX’s financials ahead of the IPO, which in theory leads to a big pop in the stock — some of which Google parent Alphabet owns.

Alphabet owns a 6% stake in SpaceX, worth upwards of $100 billion. “Every dollar [Google pays] in compute inflates the revenue that inflates the valuations that inflate their own balance sheet. Capex that funds itself on paper,” Hedgie added.

Despite the concerns, the bull case for SpaceX is strong too, and some analysts believe negative sentiment may actually be good for the stock.

“I am optimistic about how much negativity I’ve picked up as I’ve talked to other investors over the past couple weeks. I think all that is actually bullish for that initial day of trading,” Munster said to CNBC. “When you put SpaceX in the near-term and the long-term, it really has it all. It’s got rapid revenue growth, a large TAM, space, AI, national defense, Elon factor, etc. All this put together objectively is that the stock does go higher; I’m very positive on the long-term.”

The first test for SpaceX will come when shares are slated to start trading this Friday.

Pras Subramanian is Lead Transportation Reporter for Yahoo Finance. You can follow him on X and on Instagram.

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