Space Exploration Technologies (SPCX +1.54%), better known as SpaceX, has grand ambitions to eventually help mankind colonize Mars, and much of the attention surrounding the company is, understandably, focused on its rocket business.
But a growing part of SpaceX's opportunity lies in its neocloud business, through which it rents out capacity from its high-performance data centers. Here's what some investors may be missing about SpaceX's growing AI empire.
Image source: Getty Images.
SpaceX is an AI deal-making machine
Recent research from Gartner estimates that by 2030, neocloud providers like SpaceX will hold 20% of the $267 billion AI cloud market. And the recent moves by SpaceX could help the company become a key player.
First, the company's $60 billion purchase of Cursor, an AI coding company, helped bolster SpaceX's Grok AI software and make its development capabilities more robust.
SpaceX has also inked a slew of new agreements with tech companies for AI compute power. One of the most recent was a $6.3 billion contract with Reflection AI, which will pay about $150 million per month for access to SpaceX's Colossus 2 data center. That deal is set to run through 2029 (though either party can cancel it with 90 days notice).
Even some of the largest cloud computing players are renting SpaceX's neocloud space. Alphabet's Google recently signed a multiyear deal to access 110,000 Nvidia GPUs from SpaceX's data centers. With Google rapidly expanding its Gemini AI, that will help give it the processing power it will need -- while bringing in an estimated $30 billion for SpaceX over the contract's term.
Last, but certainly not least, is SpaceX's blockbuster deal with Anthropic. The AI company is reportedly paying $15 billion annually over the next three years to rent the entire capacity of SpaceX's Colossus 1 data center.That will give Anthropic access to 220,000 Nvidia GPUs for AI computing while providing SpaceX with sizable and stable revenue.
NASDAQ: SPCX
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What all of this means for SpaceX and shareholders
SpaceX is a bit of an odd company. Its long-term goals lay in the area of space exploration, yet it's building a large neocloud business too. Making things even more complicated is that most of its revenues today come from its satellite internet connectivity business, Starlink.
Still, its neocloud business is growing fast. With its recent deals added to the company's previously disclosed cloud sales, the segment already has an annual revenue run rate of around $26 billion.
If SpaceX can build more data center capacity and add customers of similar caliber to its current ones, its cloud business will become an even more important part of its future.
It's a promising endeavor for SpaceX, to be sure. Still, investors should know that buying this stock right now carries significant risks. The company is spending heavily -- capital expenditures were $20.7 billion last year -- and its shares are expensive. SpaceX stock trades at a trailing price-to-sales (P/S) ratio of 103, -- far above the tech sector's average P/S ratio of about 9.
While the company is trying to build out an AI empire right now, the hefty premium that investors would have to pay for its shares should give them pause.
