Back in January 2015, $Alphabet(GOOGL)$ and Fidelity collectively invested US$1 billion in $SpaceX(SPCX)$ , then valued at around US$10 billion. Few investors could have predicted how unusual the relationship would become.
Today, Alphabet is both a major SpaceX shareholder and a customer paying for computing capacity through a separate commercial agreement.
That creates an interesting situation: Google is benefiting from SpaceX’s potential growth as an investor while also relying on its computing infrastructure to support AI demand.
But with SpaceX’s valuation coming under pressure, is this strategic relationship becoming a financial risk for Alphabet?
1. Alphabet’s SpaceX investment has grown enormously
Alphabet’s latest holdings disclosure showed its SpaceX position increasing to approximately 555 million shares, compared with 551.2 million previously.
The company had previously disclosed that its SpaceX holding was worth approximately US$94.1 billion at the end of June.
However, SpaceX’s share price subsequently declined, creating pressure on the reported value of Alphabet’s investment.
Alphabet recorded an US$8.7 billion net loss on equity securities in the third quarter. Its financial filing indicated that unrealised losses on marketable equity securities were largely attributable to SpaceX.
The loss reduced reported earnings per share by approximately US$0.55.
It is important to understand that this was largely an unrealised investment loss. Alphabet did not need to sell its SpaceX shares for the decline in market value to affect its reported earnings.
This highlights one risk of holding a large investment in a company whose valuation can fluctuate significantly.
2. Google is paying SpaceX US$920 million per month
The relationship goes beyond share ownership.
According to SpaceX’s regulatory filing, Google agreed to pay approximately US$920 million per month from October 2026 through June 2029 for computing capacity.
The agreement covers approximately 110,000 Nvidia GPUs, CPUs, memory and related components. Capacity was scheduled to ramp up through September at a reduced fee.
This is a significant commercial arrangement.
Google needs substantial computing resources to support its AI products and services, including Gemini. Accessing external infrastructure can help meet demand while its own data-centre capacity expands.
However, the agreement also raises questions about costs and supplier dependence.
Google is one of the world’s largest technology companies, with its own AI chips, data centres and cloud infrastructure. Investors will want to understand how much value this additional computing capacity creates.
3. The relationship creates an unusual financial connection
Consider the two sides of the arrangement.
As a shareholder, Alphabet benefits if SpaceX’s business and valuation grow.
As a customer, Google pays SpaceX for computing capacity.
This means SpaceX’s success could potentially benefit Alphabet through investment appreciation, while the commercial agreement provides access to computing resources.
But the risks are also connected.
If SpaceX’s valuation declines, Alphabet may record further investment losses. If the cost of external computing capacity becomes less attractive, Google may need to reassess its infrastructure strategy.
The arrangement is not automatically a problem. What matters is whether the investment and commercial agreement each make financial sense.
4. Alphabet is also expanding its exposure to AI hardware
Another interesting development was the disclosure of a $Qualcomm(QCOM)$ holding worth nearly US$548 million.
Reuters reported that Alphabet’s position in Qualcomm increased during the third quarter. However, investors should be cautious about assuming this was a straightforward open-market purchase, as the holding may be connected to GV’s investment activity and Qualcomm’s acquisition of Modular.
The broader point is that Alphabet has exposure across several parts of the AI ecosystem, including computing infrastructure, chips and cloud services.
This reflects how the AI race is expanding beyond software and models into the hardware and infrastructure needed to operate them.
5. What should Alphabet shareholders watch?
I would focus on three areas:
• SpaceX valuation: Further declines could create additional volatility in Alphabet’s reported investment earnings.
• Computing agreement: Google needs to demonstrate that the additional capacity supports profitable AI and cloud growth.
• Capital expenditure and cash flow: Alphabet must balance its own substantial infrastructure spending with external computing commitments.
There is also a wider earnings consideration. Alphabet’s October 29 share-price decline was not caused by the SpaceX loss alone. The company also missed revenue and earnings expectations, while negative free cash flow and rising AI infrastructure spending raised concerns among investors.
My view
I find Alphabet’s relationship with SpaceX fascinating because it illustrates how interconnected the AI and space industries have become.
Google is not simply investing in Musk’s company. It is also purchasing computing capacity through a substantial commercial agreement.
The long-term opportunity could be significant, but investors should distinguish between the potential value of an investment and the economics of being a customer.
For Alphabet, the key question is whether its AI spending and external partnerships will generate enough additional revenue and profit to justify their costs.
SpaceX may be an important part of that strategy, but Alphabet still needs to demonstrate that its own AI and cloud businesses can deliver sustainable financial returns.
For discussion purposes only.
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