SpaceX credit spreads rise after $40 billion debt report

SpaceX’s five-year credit default swap spread rose to 194 basis points after reports of a $40 billion debt plan for Nvidia chips.

The Wednesday quote compared with approximately 110 basis points when trading began in June, according to the reported market figures. At the higher level, protecting $1 million of borrowing against default carried an annual cost of $19,400.

Bond prices also fell: MarketAxess data showed the spread over Treasuries for SpaceX’s bond maturing in 2056 widened nine basis points on Wednesday to 236 basis points. That compared with 175 basis points in June, indicating a higher premium for holding the corporate obligation rather than government securities.

Chip purchases add another financing round

The reported financing proposal comprises $10 billion of bank borrowing and $30 billion of investment-grade bonds, with proceeds intended for Nvidia chip purchases. Apollo is expected to arrange the transaction, while Pimco is reportedly participating in financing discussions; neither role is described as a completed commitment.

The proposed $40 billion package would exceed the $25 billion investment-grade bond sale that SpaceX reportedly completed in June. That earlier borrowing followed an initial public offering reported to have raised $86 billion just weeks beforehand.

The distinction between raising equity and adding debt matters for the financing structure: the latest proposal involves further borrowing rather than another share sale. The reported discussions do not establish final pricing, repayment terms or when the transaction might close.

Jonas describes doubts about AI ambitions

Morgan Stanley analyst Adam Jonas wrote this week that some investors questioned whether SpaceX could attain “success as a major provider of frontier AI models”. He also cited skepticism about its ability to deploy “any amount of orbital compute in any time horizon”.

Jonas described a client gathering at which none of the 40 attendees indicated that they owned SpaceX shares. That observation describes one audience, not a representative measure of investor ownership, and does not establish why credit spreads widened.

AI borrowing faces broader credit scrutiny

The reported market figures showed Oracle’s five-year default protection spread reaching 244 basis points, an increase of 40 basis points since the beginning of the previous month. Nvidia’s equivalent spread stood near 81 basis points, compared with 45 basis points in early July.

Reported quotes for Alphabet, Meta and Microsoft protection contracts also approached their historical highs. The widening extends beyond SpaceX as technology companies, including Alphabet, Meta, Oracle and Amazon, use loans and bonds to finance US AI infrastructure.

If the higher spreads persist into a SpaceX financing, borrowing on otherwise comparable terms would carry a larger premium over Treasuries. If that repricing extends across technology borrowers, more expensive financing could constrain infrastructure budgets and the associated flow of investment into equipment and construction.

If lenders instead provide funding on terms SpaceX accepts, the company could proceed with the proposed chip purchases without that constraint. The unresolved issues are whether the package closes, what lenders charge and whether the AI activities Jonas described can develop into businesses capable of supporting the additional debt.