SpaceX has closed $40 billion of debt to buy GPUs, Elon Musk said on Sunday, wrapping up one of the largest AI chip financings yet just as lenders are pulling back from the rest of the sector.
Musk dropped the news at 3:11 PM ET / 12:11 PM PT (4:11 AM JST Monday) in a reply to investor Chamath Palihapitiya, who had been discussing a credit crunch for AI data-center builders:
“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,” he wrote. “SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue.” His forecast for everyone else was blunt: “the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.”
When Sawyer Merritt tied the deal to SpaceX’s guidance for $35 billion to $40 billion of fourth-quarter capital spending, Musk added a clarification: “This is primarily callable debt for GPU purchases that will arrive in Q1 and Q2. Not a major factor this quarter.” Callable means SpaceX can pay it back early, which is handy if rates come down.
What we know about the deal
SpaceX hasn’t published terms, so the details come from reporting over the past three weeks. The Financial Times first reported the plan in early October, and Reuters confirmed a split of about $10 billion in bank loans and $30 billion in investment-grade debt to pay for Nvidia chips, with Apollo leading and PIMCO in talks to take part. CNBC reported that the GPUs themselves would likely serve as collateral.
Bloomberg later described a special purpose vehicle that would keep the borrowing off SpaceX’s balance sheet, led by Goldman Sachs with Apollo-backed investors and split into three privately placed tranches, the largest a subordinated piece of $25 billion to $30 billion, Investing.com summarized. The structure matters because an earlier xAI chip arrangement didn’t get the accounting treatment it was designed for, and SpaceX ended up recognizing about $13 billion of debt.
The price went up along the way. Semafor reported on Oct. 22 that the lowest-rated slice was expected to pay about 8.3% and a safer, chip-backed piece about 7.75%, more than a percentage point above where SpaceX’s existing bonds trade. It blamed an AI loan market that has pulled back sharply in recent weeks. Final pricing hasn’t been disclosed.
Why it needs the money
The chips go into Colossus. Musk said in September that the Memphis sites were running 230,000 Nvidia chips at Colossus and 550,000 at Colossus 2, and that he hoped to get to 1.21 million by late December, “if we get lucky.” SpaceX’s third-quarter results showed its AI business turning a profit for the first time, helped by renting compute to outside AI developers. For context, SpaceX already sold $25 billion of bonds two weeks after its June IPO.
The “guppy” line is the part the rest of the industry will chew on. Musk’s argument is that cash from Starlink, the satellite internet KDDI’s au also sells in Japan, plus rocket launches, makes SpaceX a safer borrower than cloud start-ups whose only income is renting out the same GPUs they borrowed to buy.
Meanwhile, the rockets haven’t stopped. About 40 minutes after Musk’s post, SpaceX shared a full-duration, 33-engine static fire of the Super Heavy booster for Flight 15, the mission where it plans to try catching both stages.
Sources: Elon Musk on X (clarification), Sawyer Merritt on X, Semafor, Bloomberg via Investing.com, Reuters, CNBC, TokenPost, SpaceX on X.
— The EVX News team
Featured image: An Nvidia HGX B200 eight-GPU board on display. Photo: Pokiiri, via Wikimedia Commons, licensed under CC BY-SA 4.0 (cropped).
