Why is Space Exploration Technologies stock sliding today?

Space Exploration Technologies (SPX) shares experienced a decline of 1.9% during early trading on Tuesday following the revelation that the company is planning to raise $40 billion in debt to finance a substantial Nvidia AI chip purchase. The financing scheme encompasses roughly $10 billion in loans and $30 billion in investment-grade bonds, with Apollo Global Management anticipated to spearhead the deal, and Pimco among the earliest lenders in discussions.

Although this financing plan aligns with CEO Elon Musk's objective of constructing SpaceX's AI infrastructure solely on Nvidia hardware, the expansive borrowing scale—projected to finalize in 2027—has disconcerted investors already closely monitoring the company's capital expenditures. In the first half of 2023, SpaceX's spending amounted to approximately $28.5 billion, compared to mere $3.5 billion in operating cash generation.

Musk further reiterated on Wednesday that both Tesla and SpaceX will own and operate the Terafab AI chip facility in Texas, with TSMC potentially subleasing a fraction of the plant, accentuating the narrative of substantial ongoing capital commitments. Additionally, a 328.4 million share lock-up expiration is slated for October 9, marking the Day-120 tranche of SpaceX's phased post-IPO release, which has historically induced selling pressure as investors prepare defensively for potential insider supply entering the market.

Despite analysts maintaining a generally optimistic long-term outlook, with Goldman Sachs raising its price target to $230 and Morgan Stanley preserving a $300 target, citing AI infrastructure potential and Starlink growth, these bullish assessments have not been sufficient to counterbalance the immediate concerns stemming from the debt news and the impending lock-up expiration.

The broader market showed minimal support, with the Nasdaq declining by 0.2% and the S&P 500 remaining essentially flat, while FOMC minutes from the September meeting—indicating the Federal Reserve's first rate hike since 2023—are expected to be released today, introducing an additional layer of macroeconomic uncertainty. Consequently, a convergence of a large, leverage-heavy financing announcement surfacing post Tuesday’s close, an imminent lock-up expiration just two days away, and a flat-to-negative broader tape has generated near-term selling pressure, driving SPX lower in pre-market trading, even as the stock remains well above its $135 IPO price and the 52-week low of $104.83.