Musk Says SpaceX Closed $40 Billion; Predicts Neocloud Shakeout

STARBASE, Tex., Oct. 25 — ElonElon Musk said on Sunday that SpaceX had closed $40 billion of debt to buy chips for artificial intelligence, and that the debt markets had almost entirely shut off access to money for any company without substantial revenue independent of AI data centers.

“SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue,” he wrote on X. “That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.”The NeocloudsCloud companies that provide computing built for artificial intelligence, in CNBC’s description. CoreWeave and Nebius are among them; they mostly serve technology customers, Reuters notes.

Mr. Musk posted at 3:11 p.m. Eastern, in reply to Chamath Palihapitiya, the founder of Social Capital, who had written that “2027 will be a turbulent year because it will clear out a bunch of wrong/bad bets.” Mr. Musk’s reply began “Pretty much.” Thirty-nine minutes later he added that the money was “primarily callable debt for GPU purchases that will arrive in Q1 and Q2,” which CNBC took to mean the first half of 2027. “Not a major factor this quarter,” he wrote; SpaceX told investors last week that it expects capital spending of $35 billion to $40 billion this quarter.CallableCallable bonds can be paid off by the issuer before they mature, the S.E.C.’s Investor.gov explains, and often pay a higher return to make up for the risk of early repayment.

Whether the deal is done is less certain: as of late Sunday the talks over pricing were still going on and the debt had not priced, people familiar with the discussions told Bloomberg News, and Reuters wrote that it was “not immediately clear” from Mr. Musk’s post what he meant by the deal being “closed.” The parties were still working to finish the package in the coming days, Bloomberg’s sources said. SpaceX had filed nothing about the debt with the Securities and Exchange Commission by 6:39 a.m. Eastern on Monday.

Mr. Musk’s posts describe a split between borrowers with other businesses behind them and companies that only rent out AI chips. If he is right, the gainers are borrowers like SpaceX and the lenders who can charge the rest more; those who pay are the neoclouds, their shareholders and their creditors.

The Deal

What is known of the financing’s structure comes from reports, not from SpaceX. Reuters reported earlier this month that SpaceX was in talks with banks and asset managers. A special purpose vehicle would buy Nvidia’s chips, keeping the borrowing off SpaceX’s balance sheet and protecting its investment-grade credit ratings, Bloomberg reported on Friday, citing people familiar with the matter.NVDANasdaq204.64▼9.02−4.2%Nvidia · Friday’s session Bankers led by Goldman Sachs have been discussing the structure with investors led by Apollo Global Management, with an Apollo-backed firm, Atlas SP, to manage the vehicle, and Pacific Investment Management Co. has considered investing, Bloomberg reported on Sunday, citing people familiar with the matter.

The bonds would be placed privately in three tranches, according to Investing.com’s summary of Friday’s report: a subordinated portion of $25 billion to $30 billion and two others of about $10 billion and up to $5 billion. Yields on that junior, subordinated portion had been discussed in the mid-8 percent range, but worsening markets had “prompted renewed pricing negotiations.” SpaceX’s own senior unsecured notes carry a weighted-average coupon of 5.855 percent, its quarterly report says, but that rate was fixed when it sold $25 billion of them in June, not by today’s market.Off the BooksThe vehicle would avoid a repeat of xAI’s attempt last year to raise as much as $20 billion off the balance sheet through a sale-leaseback with Valor Equity Partners, Bloomberg reported. SpaceX’s quarterly report records $12.9 billion of debt at Sept. 30 from three failed sale-and-leaseback deals for AI infrastructure.

The Other Borrowers

Two filings after Friday’s close showed companies with other business still finding banks. Marvell Technology, which designs chips for data centers and networks, disclosed a $3 billion revolving credit line, with Bank of America as agent, that replaces a $1.5 billion one; nothing was drawn. TeraWulf, which develops data centers for bitcoin mining and high-performance computing, said its secured revolving credit line, for which Morgan Stanley is agent, had been raised to about $400 million from $250 million.

The closest like-for-like figures are bank-loan margins: Marvell, a chip designer, can borrow on its new five-year line at 0.875 to 1.5 percentage points over term SOFR, a benchmark rate, depending on its debt ratings, while Nebius, a neocloud, has a secured one-year bridge loan of $3.5 billion from Citibank at 2.75 points over term SOFR, rising every 90 days to as much as 3.50. CoreWeave’s figure is a market yield, not a loan rate: its unsecured debt was yielding about 15 percent last week, CNBC reported, and unnamed sources on credit desks told it that the high-yield debt market was effectively on hold until after the midterm elections on Nov. 3.

SpaceX’s own credit has been under pressure, too: credit-default swaps on its debt rose last week to a record 266 basis points at Friday’s close, “a level more typical of a junk-rated borrower,” Bloomberg reported.The SwapsCredit-default swaps are used to insure against losses on a company’s debt, Bloomberg notes; their price is quoted in basis points, each a hundredth of a percentage point. The three largest rating firms all rate SpaceX investment grade, Bloomberg noted, but the price of its debt has tumbled in recent weeks.

The Other Side

Mr. Musk speaks as a rival: SpaceX sells computing from its own data centers, which makes it, as CNBC put it, “a direct competitor to the neoclouds.” He later said SpaceX would not buy any neoclouds, calling it “pointless,” Reuters reported.

That means the 200+ neoclouds are going to see guppy-level death and consolidation.

Nvidia, an investor in several neoclouds, and the neoclouds’ own managers have argued the other side. Jensen Huang, Nvidia’s chief executive, told CNBC on Thursday that capital, not demand, was short: “The demand of the capital is much greater than the availability of the capital. That’s going to get solved.” Daniel Roberts, co-chief executive of Iren, another neocloud, told CNBC last week: “We understand the increased focus from investors, but when we’re talking from customers, nothing has changed. The demand is still there.”

Nebius has argued that it can still pay for its growth. Announcing the Citibank loan on Oct. 22, Ophir Nave, its chief operating officer, said: “We still have a range of capital sources available to us to finance the next phase of growth, including asset-backed financing based on investment-grade customer commitments of more than $40 billion of long-term contracts.” Marc Boroditsky, its chief revenue officer, has told CNBC that Nebius would sell out its 2027 capacity if it brought it online, and set it apart from CoreWeave: “we’re not carrying the kind of debt that they are.”

In pre-market trading on Monday, Nebius, CoreWeave and Iren each fell more than 4 percent early and then pared their losses to about 2 percent, CNBC reported in a story first published at 4:42 a.m. Eastern.

What comes next is a filing or a price for SpaceX’s debt, and the cloud giants’ own reports: Microsoft and Alphabet on Wednesday, Amazon on Thursday. Celestica, which by its own description “enables critical data center infrastructure for AI,” reports after Monday’s close, and the Federal Reserve announces its decision on interest rates on Wednesday afternoon, before Microsoft and Alphabet report.