Google to pay SpaceX $920 million monthly for AI compute capacity

What happened: Google has agreed to pay SpaceX $920 million monthly for computing power, starting from mid-2023 until mid-2029. This deal, reported by Bloomberg and Reuters, comes days after Alphabet's $80 billion equity capital raise and ahead of SpaceX's anticipated IPO. Google will use about 110,000 Nvidia GPUs at SpaceX's xAI data centers for AI compute capacity.

Market impact: This agreement drives growth in the cloud services sector, with Google expanding its AI capabilities and SpaceX securing a significant revenue stream. It also signals a shift in the competitive landscape, with SpaceX, not a traditional cloud provider, entering the market. Nvidia, a key supplier of GPUs, benefits from increased demand.

What to watch next: SpaceX's IPO, expected next week, will reveal more details about its financial health and growth prospects. Google's earnings, due in late July, will provide insights into the financial impact of this deal on the tech giant. Additionally, monitor regulatory developments around AI and cloud services, which could influence both companies' strategies.