SpaceX debt financing wave targets Nvidia chips

SpaceX debt financing is about to get a lot bigger. The company is talking to banks and investors about raising roughly forty billion dollars to buy chips from Nvidia, according to the Financial Times, in what would be one of the largest debt financings of the artificial intelligence era. Asset manager Apollo Global Management is expected to lead the deal, with bond fund Pimco among the lenders in talks to help fund the transaction, the newspaper reported. The package would combine about ten billion dollars in bank loans with thirty billion in investment grade bonds to pay for the chip order, and it is expected to close next year.

According to people familiar with the matter, who spoke on condition of anonymity because the discussions are private, the terms are not yet final. Bloomberg's account of the same talks adds a caution: the fundraising discussions are in an early stage and could end without a deal being completed. SpaceX, Apollo, Nvidia and Pimco all declined to comment to Reuters, which also reported the story. If it closes, it would be the biggest single round of SpaceX debt financing on record. Investors treated the news coolly; SpaceX shares slipped after the Financial Times report landed, and they stayed under pressure in early trading the next day.

Tech giants turn to debt for the AI buildout

SpaceX is not borrowing alone. The Wall Street Journal reported this week that Broadcom is arranging more than fifty billion dollars in financing for a custom AI chip it is developing with OpenAI. Days earlier, Bloomberg reported that a Broadcom-linked syndicate was gathering sixty billion dollars of fresh chip financing that would benefit Anthropic and other companies. Oracle, the database giant, is in talks with Apollo and Goldman Sachs about funding a large chip purchase of its own, the Journal reported. Taken together, the SpaceX debt financing talks and the Broadcom and Oracle deals show that the debt market, not the stock market, is becoming the engine room of the AI boom.

For years, the biggest cloud companies paid for servers and chips mostly out of cash flow, but that is no longer enough now that data center buildouts run into the hundreds of billions. Morgan Stanley estimates AI infrastructure will require one and a half trillion dollars in external financing by 2028, even as lenders and investors grow more cautious about funding the industry's expansion. That estimate is the backdrop for every new round of SpaceX debt financing. Nigel Green, the chief executive of deVere Group, put the shift bluntly: "The AI build out started on cash. It's increasingly running on credit, and credit changes the risk profile entirely." His warning, made to Reuters, captures the new mood on trading floors: the technology keeps delivering, but the bill is being paid with borrowed money.

Credit markets are already repricing the risk. The cost of insuring SpaceX debt financing against default jumped to record highs after the report, Reuters reported, and the company's bonds slipped alongside its shares. Its bonds maturing in 2056 were trading at eighty-five cents on the dollar, at a yield more than two percentage points above U.S. Treasuries, which means lenders now want extra compensation for backing the AI bet. One measure of scale: a single gigawatt of AI computing capacity can cost tens of billions of dollars to build, so the chips SpaceX is buying are only the start of the spending.

Why lenders keep signing, and what could break

Lenders keep signing on for this kind of SpaceX debt financing because demand keeps growing. Musk has set out plans for SpaceX's xAI business to hold as many as 1.44 million Nvidia chips at its Memphis Colossus data center complex before the end of the year, and the company ended the second quarter with 1.4 gigawatts of AI computing capacity. The target is two gigawatts by year end and up to ten gigawatts by the end of next year, Barron's reported. Musk said earlier this year that SpaceX would build its AI efforts exclusively on Nvidia hardware, whose market value has climbed toward six trillion dollars this week on the back of exactly this kind of buying. Governments are placing the same bet with public money: seventeen nations just backed a joint AI capacity declaration.

The risk is that the borrowing outruns the revenue. Rohit Sipahimalani, the chief investment officer of Singapore state investor Temasek, said this week that the biggest risk to markets is the AI narrative unwinding because of safety concerns, regulation, or simply because end users do not see enough return on their investment. That skepticism is spreading on Wall Street: Ray Dalio called the AI trade a classic bubble this week. A fresh rise in oil prices and turbulent sovereign bond markets have pushed borrowing costs in major economies to multi-decade highs, which makes every extra dollar of debt more expensive. None of the companies involved in the SpaceX talks has confirmed them, and the talks could still collapse. But if SpaceX debt financing on this scale goes through, it will confirm that the AI boom's next chapter is being written by lenders, not just by engineers.