Borrow another 40 billion USD, SpaceX plans to buy Nvidia chips

Following the $25 billion investment-grade bond issuance in June, SpaceX is now planning to raise $40 billion to finance large-scale purchases of Nvidia chips, further increasing its bet on AI infrastructure development.

According to a recent report by the Financial Times citing sources, SpaceX plans to raise funds through about $10 billion in bank loans and $30 billion in investment-grade bonds to pay for this massive chip order. Apollo is expected to lead the deal and distribute the debt to a broad range of institutional investors; bond giant Pimco is also among the few lenders involved in the negotiations. The transaction is expected to be completed in 2027.

This transaction once again highlights that AI data center and chip infrastructure construction are consuming increasing amounts of capital, and alternative financing channels such as private credit are becoming important sources for supporting this wave of AI capital expenditures.

Musk Doubles Down on Nvidia Architecture

The direct purpose of this SpaceX financing round is to provide financial support for large-scale purchases of Nvidia chips. In SpaceX's performance call in August this year, Musk clearly stated that the company had decided to build entirely on the Nvidia platform. Musk said:

"We have decided to build entirely on Nvidia because we believe the Vera Rubin architecture is the optimal architecture. We believe this is the best AI computer, and we highly value our close cooperation and partnership with Nvidia on multiple levels."

Vera Rubin is Nvidia's latest generation of cutting-edge AI computing platforms. Musk's statement further clarifies SpaceX's technical roadmap for this large-scale chip purchase, strengthening its cooperative relationship with Nvidia.

Investment-Grade Rating Supports Large-Scale Financing

SpaceX's ability to pursue such large-scale debt financing is closely tied to its investment-grade credit rating. The company received a BBB rating—which is on the lower end of investment grade—shortly after completing its $86 billion IPO in June this year and completed a $25 billion investment-grade bond offering less than two weeks after listing.

The investment-grade rating allows SpaceX bonds to enter a broader spectrum of institutional investor allocations. Compared to junk bonds, institutions such as insurance companies and pension funds typically have more space in their portfolios for investment-grade bonds, thus giving SpaceX a wider base of potential buyers for large-scale debt financing.

However, SpaceX bonds had already shown clear signs of pressure. According to MarketAxess data, its bonds maturing in 2056 are currently trading at around 85 cents on the dollar, with yields about 2.27 percentage points higher than US Treasurys, approaching junk bond levels. According to reports citing analysts, limited financial disclosure by Musk is one of the main reasons some investors remain cautious about SpaceX debt.

Insufficient Disclosure Deters Investors

This financing is not SpaceX’s first attempt to seek external funds for chip purchases, but earlier efforts were not successful. According to sources cited in reports, when SpaceX previously pitched this multi-billion-dollar chip financing to some investors, it only provided a brief two-page transaction memo, which even included space images and an arrow marking the company would build a data center “somewhere in the universe.”

A source was quoted as saying:

"How are we supposed to take this to the investment committee?"

Bringing Apollo in to lead the deal this time is, to some extent, intended to address the above shortcomings. Leveraging Apollo’s credibility among institutional investors and its distribution network, SpaceX is looking to push this sizable financing through more smoothly.

Apollo's Deep Investment in AI Chip Financing Market

For Apollo, this deal represents its latest move in expanding its investment-grade corporate loan business. With $800 billion in credit assets under management, Apollo has made high-grade corporate financing a core business and previously led several multi-billion-dollar financings for large enterprises such as Intel and Bayer. Its life insurance and annuity subsidiary Athene typically subscribes to a significant portion of such offerings.

In June this year, Apollo also led a $35 billion chip financing transaction to purchase processors from Nvidia competitor Broadcom, setting a record for the largest single deal in the private credit market at that time.

On a broader scale, in August this year, Nvidia announced a partnership with several leading Wall Street institutions to jointly establish a $500 billion financing platform. Institutions signing the memorandum of understanding include Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR. This consortium aims to pool third-party capital to help Nvidia's small and medium-sized clients acquire chips and build AI infrastructure at lower financing costs, with Nvidia itself potentially backing up to 25% of the chip value.

This SpaceX financing is yet another large transaction amid the current wave of AI infrastructure financing.