Elon Musk says SpaceX closed $40 billion debt deal for AI chips as firm ‘investment grade, has Starlink, launch revenue’
Elon Musk has in a post on his social media site X (formerly known as Twitter), said that SpaceX has closed a $40 billion debt deal to for GPUs (chips) to run its artificial intelligence data centres.
Responding to venture capitalist Chamath Palihapitiya on reasons that “compute” for AI projects is likely to be stranded in inventory in 2027, the billionaire said SpaceX is “investment grade and have Starlink and launch revenue” to pay for required chips.
SpaceX has finalised the debt raise to pay for Nvidia's graphics processing units (GPUs), Bloomberg reported citing sources. The deal is off-balance-sheet deal and parties were still engaged in pricing discussions as of Sunday, they added.
In his posts, mostly responses to X users, Elon Musk sought to differentiate SpaceX from so-called “neoclouds” that sell high-end computing power to tech companies. These firms have come under intense scrutiny over the past two weeks over their heavy borrowing and demand prospects.
“As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers. SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue. That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many,” he wrote.
He later said that SpaceX won’t buy any neoclouds, calling it “pointless.”
According to the Bloomberg report, concerns over the AI infrastructure boom are also being felt by SpaceX. It added that final pricing for its off-balance-sheet structure for $40 billion in chip financing were “caught in the middle of the recent neocloud market turmoil”.
Bankers led by Goldman Sachs Group Inc. had been discussing the structure with investors led by Apollo Global Management Inc., with Apollo-backed Atlas SP slated to manage the entity, the publication reported citing sources.
Pacific Investment Management Co. had also considered investing, as per sources. The debt was expected to be issued in the form of private placements called 144a, they said.
With the latest structure, SpaceX would avoid a repeat of a financing attempt last year by Musk’s AI startup, xAI. In that deal, an entity sought as much as $20 billion of off-balance sheet debt through a sale-leaseback agreement with Valor Equity Partners. But SpaceX ultimately had to record about $13 billion of that debt after it was declared a “failed sale-leaseback arrangement,” according to SpaceX’s latest earnings report.
The debt raise comes after strong Q3 earnings, with SpaceX’s AI unit turning a profit for the first time. The enterprise is increasingly driving revenue by selling computing power from its Memphis data centers to external AI labs and hyperscalers.
During SpaceX’s earnings call, Chief Financial Officer Bret Johnsen indicated that the company was in discussions with lenders over further borrowing. “We have a lot of conviction that we are going to be able to do this in a very measured fashion and continue to keep ourselves in that IG status along the way,” he said, pointing at the firm’s investment-grade rating.
(With inputs from Bloomberg)
Jocelyn Fernandes is a journalist and editor with nearly 13 years of experience covering the business, corporate, economy and markets beats in news.<br> As chief content producer for around three years at Livemint (Hindustan Times), Jocelyn publishes breaking stories, explainers, features and live blogs on a range of business and economy topics, including the Budget, corporate developments, stock markets, income tax, money and personal finance, cryptocurrency, government policy, impact of US tariffs, international developments and more.<br> Jocelyn's writing philosophy is focused on delivering news in an accurate and accessible format for readers. She thus focuses her news coverage on explainers and FAQs in order to breakdown business, corporate, economic, and policy topics that are of importance to everyday readers.<br> She holds a Bachelors in Mass Media (BMM) and Post Graduate Diploma (PGD) in Journalism and Communication and has previously written for online business and markets news site Moneycontrol (Network18), Business-to-business (B2B) trade publications — the industry magazines Power Today and Solar Today (ASAPP Media), and the national news agency United News of India (UNI).<br> Outside of work, Jocelyn keeps up-to-date with local and international news, enjoys reading fiction books, novels and short stories, and enjoys movies, travelling and art. <br> She can be found on X and LinkedIn, and reached by email: <a href="jocelyn.fernandes@htdigital.in">jocelyn.fernandes@htdigital.in</a> <br> X/ Twitter handle: <a href="https://x.com/scribeJocelyn">@scribeJocelyn</a> <br> LinkedIn: <a href="https://in.linkedin.com/in/jocelyn-fernandes-journalist">LinkedIn</a>
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