SpaceX’s $40bn AI debt deal faces hurdles amid credit market turmoil - Bloomberg

SpaceX's proposed $40 billion AI financing deal is facing challenges due to credit market turbulence and escalating borrowing expenses, Bloomberg reported, drawing from undisclosed sources. The proposed transaction would provide funding for the acquisition of Nvidia chips via a special purpose vehicle (SPV), enabling SpaceX to exclude the borrowing from its balance sheet and safeguard its investment-grade credit ratings.

Goldman Sachs is leading negotiations with investors, led by Apollo Global Management, according to the report. Apollo-backed Atlas SP is set to manage the financing entity, while Pacific Investment Management Co. is also contemplating participation.

However, recent volatility in credit markets has made discussions about borrowing costs more complex, as investors evaluate the risks linked to financing substantial AI infrastructure initiatives. Initial conversations suggested yields on a subordinated section of the debt hovering around the mid-8% range; however, deteriorating market conditions have triggered renewed pricing negotiations.

The proposed financing encompasses three tranches of privately placed bonds, with a subordinated segment estimated at $25 billion to $30 billion. The remaining portions would amount to roughly $10 billion and up to $5 billion, as per Bloomberg. This structure echoes a previous financing arrangement involving Elon Musk's AI startup xAI, which failed to meet its intended accounting treatment.

In response, SpaceX acknowledged around $13 billion in debt after auditors determined the arrangement did not qualify as a completed sale-leaseback transaction.

The latest financing talks come after SpaceX reported profitable AI operations in its third-quarter results. The company's Memphis data centers have generated revenue by providing computing power to external AI developers and major tech firms. SpaceX officials have suggested that further borrowing will be required to facilitate growth while preserving investment-grade credit ratings. The proposed deal is also a follow-up to Apollo's involvement in a significant AI chip financing deal between Anthropic and Broadcom.