For years, investors could easily identify Alphabet's (GOOGL -1.54%) biggest artificial intelligence (AI) competitors. OpenAI had ChatGPT. Anthropic had Claude. Microsoft had Copilot. Nvidia supplied the chips powering the industry.
But the AI race is changing. Alphabet may now have a far more ambitious competitor: SpaceX.
That sounds strange at first. One company runs the world's largest search engine and some of the biggest consumer and cloud platforms. The other launches rockets and operates a satellite internet network.
But SpaceX's acquisition of xAI changed the equation. While that doesn't make SpaceX and Alphabet equal today, it could make the former one of the most interesting companies for Alphabet investors to watch.
Image source: Getty Images.
Alphabet's biggest AI advantage isn't Gemini.
Investors often reduce Alphabet's AI story to one question: Can Gemini beat ChatGPT or Claude? I think that's too narrow. Alphabet's real advantage comes from everything surrounding Gemini.
The company designs its own TPU chips, operates enormous data centers, runs Google Cloud, and distributes AI through Search, YouTube, Android, Chrome, Workspace, and other products used by billions of people.
Alphabet calls this its full-stack approach to AI. And it matters because the company controls multiple layers of the system rather than depending on outside suppliers. That gives Alphabet an extraordinary combination of infrastructure and distribution.
For years, that has been one of the strongest reasons to believe Alphabet can win in AI. But SpaceX is now attempting something surprisingly similar, just in a completely different form.
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Key Data Points
SpaceX is becoming an AI company.
The acquisition of xAI is the obvious starting point.
SpaceX now owns Grok, giving it a frontier AI model and an AI research organization. But the more important part of the strategy is what SpaceX can build around that model.
It is developing a large-scale AI compute infrastructure and eventually extending that infrastructure into space. It has recently expanded compute capacity to 1.4 Gigawatts (GW), up from 0.4 GW a year ago, with more to come.
SpaceX is also pushing deeper into chips . SpaceX and Tesla announced an initial $16.8 billion investment in Terafab, an advanced semiconductor facility in Texas designed to produce chips for applications including SpaceX's future AI computing needs.
That is significant. SpaceX isn't simply developing an AI model and renting someone else's infrastructure. It is increasingly trying to control the infrastructure underneath it. And that's where the comparison with Alphabet becomes interesting.
The real AI battle may be beyond AI models.
This is the part I think investors should focus on. The AI race won't ultimately depend on which chatbot wins. It will likely center around who controls the infrastructure and distribution that AI runs through.
To this end, Alphabet already has an extraordinary position. Its latest results show just how quickly that ecosystem is developing: Google Cloud revenue grew 82% year over year, Gemini reached 950 million monthly active users, and Alphabet continues to integrate AI across Search, YouTube, Cloud, and its consumer products.
Comparatively, SpaceX is nowhere near that level of commercial AI distribution.
Still, it is worth mentioning that SpaceX doesn't need to copy Google. It is building something fundamentally different. Imagine an ecosystem in which SpaceX controls the AI models, the computing infrastructure, the chips, the connectivity network, and eventually even the platforms carrying that computing capacity into orbit.
That's not another chatbot competitor. It's another technology stack altogether.
Why Alphabet's investors should care?
Alphabet's moat is partly due to vertical integration. SpaceX is now pursuing vertical integration of its own.
That creates an interesting long-term possibility. If AI becomes increasingly constrained by electricity, land, data-center capacity, and access to computing power, then SpaceX's combination of launch economics, satellite manufacturing, connectivity, and AI infrastructure could become unusually valuable.
And if orbital computing eventually becomes economically viable, SpaceX could possess an infrastructure advantage that Alphabet simply cannot replicate without partnering with someone else.
That's a very big if, of course. Moreover, Alphabet's terrestrial infrastructure remains much more credible. Google has decades of experience in AI research, cloud computing, data centers, and software. SpaceX still has to prove that its broader AI vision can translate into attractive returns.
But that's precisely why investors should watch this development in coming years.
