Google's Investment in SpaceX: 100x Growth in a Decade — But There's a Catch
At first glance, this might seem like just another loud headline about a fresh deal, but the reality is far more interesting. It is about a strategic move made over a decade ago that has now turned into one of the most impressive investment stories on the market. Google has revealed the value of its stake in SpaceX, and the numbers are, to say the least, staggering.
How Google Entered SpaceX's Capital
In January 2015, Google, together with Fidelity, invested $1 billion in SpaceX, receiving nearly 10% of the company's shares in return. At that time, the entire SpaceX was valued at just over $10 billion. This round was led by Google, highlighting the foresight of its management.
Ten years have passed. SpaceX's value has grown manifold. In June, the company went public at around $135 per share, with a valuation of $1.77 trillion — the largest initial public offering in history. Google's stake, which now stands at about 5% of shares (the stake was diluted by subsequent funding rounds), has appreciated roughly 100 times and is estimated at approximately $94 billion.
Why Didn't the Market Appreciate This Success?
One might think that such "paper" profit would trigger a surge in Google's (Alphabet) own stock. However, the market's reaction was subdued. In the second-quarter earnings report, the revaluation of the SpaceX stake added about $99 billion to profit, pushing it to a record $112 billion. But investors were looking deeper.
Out of $9.11 in earnings per share, a full $6.26 came from asset revaluation. Without that, the quarter would have been ordinary. Moreover, Google accrued a $21.9 billion tax on this paper profit. The market was far more concerned about rising expenses: over three months, Google spent $44.9 billion on artificial intelligence, exceeding its revenues by $5.9 billion. It was these record investments in AI that alarmed market participants, not the "space" profit.
A Frozen Asset
It is important to understand: Google cannot yet freely use this money. According to the report, $80 billion of the $94 billion is locked up, with the remainder to be unlocked later. The real test will come after the lock-up period ends, when Google gains the ability to sell shares.
Incidentally, SpaceX's stock has already shown volatility. After the IPO, shares surged above $200 but fell to around $114 by July 23. The first lock-up expires in August — at the same time, SpaceX will report as a public company for the first time.
My analysis: This story is a brilliant example of patient and forward-thinking investing. However, it also serves as a reminder that "paper" profit is not the same as real money. For Google, this is more a demonstration of strategic strength than a source of liquidity. The market understands this well, which is why the reaction to the report was so subdued. The real test for this investment is Google's ability to convert it into real funds without losing value.