A measure of SpaceX’s credit risk surged to a fresh high and the company’s bonds tumbled in the secondary market on Wednesday, following reports the company is in talks with banks and investors to raise $40 billion to buy chips from Nvidia Corp.
The price of five-year credit default swaps on the company’s debt, which increases as investor concern grows, rose as much as 0.145 percentage point, or 14.5 basis points, to around 195.4 basis points a year, according to ICE Data Services. It’s the highest intraday level since the swaps tied to the Elon Musk’s rocket, satellite and AI conglomerate started actively trading in June.
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The worries are also showing in the US investment-grade secondary market. Spreads on SpaceX’s 6.65% bonds due 2056 widened 12 basis points to 238 basis points as of 9:40 a.m. in New York, according to Trace. That’s significantly wider than the 175-basis-point spread the issue was sold at in June, part of the company’s $25 billion debt deal.
Tech companies and AI model developers are investing and borrowing hundreds of billions of dollars to build and lease giant data centers full of chips to power AI systems. The worldwide expansion of computing capacity has sent the cost of everything from land to chips and power-generation equipment soaring, touching off a series of massive financing deals.
“This is unprecedented debt supply with no real ending in sight,” Sal Naro, chief investment officer at Coherence Credit Strategies, told Bloomberg News. “The world has never seen an infrastructure build like this. This is larger than the railroads because this is global, all at once.”
Wednesday’s market moves followed reports that SpaceX is looking to raise $40 billion in what would be among the biggest-ever debt financings for the AI buildout. The company’s fundraising discussions are in an early stage and could end without a deal being completed, Bloomberg reported, citing people familiar with the matter.
SpaceX is seeking about $10 billion in bank loans and $30 billion in investment-grade debt to pay for the Nvidia chips, the Financial Times reported, citing unidentified sources familiar with the matter. It added that Apollo Global Management Inc. is leading the financing, which isn’t expected to close until 2027.
A representative for SpaceX wasn’t immediately available for comment.
Broadcom Inc.’s Wall Street syndicate is starting to gather $60 billion of fresh AI chip financing to benefit Anthropic PBC and other companies, people familiar with the matter said just days ago.
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