Nvidia Just Disclosed an $18 Billion Stake in SpaceX. Here's What Jensen Huang Sees That the Market Doesn't.

At the end of August, Nvidia (NASDAQ: NVDA) published its second-quarter results and the 13F filing detailing the publicly traded stocks in which it holds positions. The filing showed that Nvidia owned roughly 122.8 million shares of Space Exploration Technologies (NASDAQ: SPCX) stock.

The disclosure showed that SpaceX was the company's second-largest holding, ahead of CoreWeave and behind Intel. As of this writing, Nvidia's stake in SpaceX is worth roughly $18 billion. Here's why Nvidia CEO Jensen Huang has placed a big bet on Elon Musk's company.

Image source: Nvidia.

Nvidia has a unique insight into SpaceX's scaling plans

At first glance, Nvidia investing in a rocket-launching and satellite communications business might appear unusual. The company's stake in SpaceX stems from a prior investment in XAI, the artificial intelligence business that was folded into SpaceX. The XAI unit has subsequently been renamed XSI, with the "SI" part of that acronym standing for "super intelligence."

Nvidia's investments in publicly traded companies center heavily around AI-focused businesses, and SpaceX has recently become a business that generates the majority of its sales from artificial intelligence. The company's revenue increased 161% year over year in the third quarter to $14.6 billion, with its super intelligence segment playing the leading role in spurring growth and increasing revenue 830% year over year to achieve $7.56 billion in sales. The super intelligence segment accounted for over half of sales in the period, while the connectivity segment and space segment recorded sales of $5.25 billion and $1.77 billion, respectively.

In addition to focusing its investments on the AI space, Nvidia tends to invest in companies with which it already has customer relationships and partnerships. Within that mold, SpaceX has quickly become one of Nvidia's biggest customers.

Speaking on the company's Q3 conference call, SpaceX CEO Elon Musk outlined massive data center initiatives. He also said that his company's data centers will be exclusively using Nvidia's processors.

On Oct. 25, Musk announced that SpaceX had secured $40 billion in debt financing to purchase graphics processing units (GPUs). Given his previous statements, that suggests a roughly $40 billion contract win for Nvidia. Musk also said that he expects the GPUs to be delivered in the first half of 2027.

Given that Nvidia's GPUs are the foundational hardware powering SpaceX's data center expansions and broader AI initiatives, Jensen Huang has unique insights into the scale of his customer's ambitions. Nvidia is also set up to win in multiple ways from SpaceX's huge AI push. Musk's company has already become one of Nvidia's largest customers and will almost certainly remain so. Nvidia stands to see substantial returns from its stake in the company if SpaceX's artificial intelligence strategies pay off.

Keith Noonan has positions in Intel. The Motley Fool has positions in and recommends Intel and Nvidia. The Motley Fool has a disclosure policy.