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Summary
Elon Musk said SpaceX (SPCX) closed $40 billion of debt for GPUs due in the first and second quarters of 2027, though Reuters said it was not immediately clear what "closed" meant.
Musk credited SpaceX's investment-grade rating and Starlink and launch revenue, saying debt markets have nearly shut off money for firms that rely on AI data centers.
He warned that more than 200 neocloud providers face failures and consolidation, a group Investing.com says includes CoreWeave and Nebius.
Gotrade News - Elon Musk said in a post on X on Sunday, October 25, that SpaceX (SPCX) closed $40 billion of debt for GPUs, citing its investment-grade rating and Starlink revenue. He warned that tight debt markets leave more than 200 neocloud providers facing failures and consolidation.
As reported by Reuters, it was not immediately clear what Musk meant by "closed" or whether investors had agreed to pricing for the debt. Musk said: "This is primarily callable debt for GPU purchases that will arrive in Q1 and Q2. Not a major factor this quarter."
SpaceX (SPCX): $40 Billion of GPU Debt Backed by Starlink Revenue
In his post, Musk wrote that "SpaceX closed $40B of debt for GPUs, but we're investment grade and have Starlink & launch revenue." According to Investing.com, the debt will mainly fund GPUs expected to arrive in the first and second quarters of 2027, and Musk set SpaceX apart from neocloud providers that rent out computing capacity to AI developers.
The deal follows reports earlier this month. Per SiliconANGLE, a Financial Times report on October 7 said SpaceX was in talks for $40 billion with Apollo Global Management as the lead investor, made up of about $10 billion in bank loans and $30 billion in investment-grade debt, with PIMCO also named as a provider of funds.
The borrowing comes as SpaceX spends heavily on AI. According to Reuters, its revenue rose 161% year over year to $14.58 billion in the three months ended September 30, AI revenue rose nearly tenfold to $7.56 billion, and CFO Bret Johnsen expects fourth-quarter capital expenditure of $35 billion to $40 billion. Before its IPO, SpaceX's S-1 listed "manufacturing our own GPUs" among its major capital expenditures, Reuters added.
Musk Sees "Guppy-Level Death" for 200+ Neoclouds
Musk said tight credit will thin out the neocloud sector. He wrote that "debt markets have almost entirely shut off access to money for any company that doesn't have substantial revenue independent of AI data centers," and that "the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many."
Neoclouds rent specialized GPU capacity to AI developers and other customers, as SiliconANGLE describes them. Musk later said SpaceX will not buy any neoclouds, calling the idea "pointless," according to Reuters.
What Does Musk's Warning Mean for CoreWeave (CRWV) and Nebius (NBIS)?
Musk named no company, but Investing.com points to CoreWeave (CRWV) and Nebius (NBIS) as neocloud providers exposed to financing costs and demand uncertainty as they expand. Reuters describes neoclouds such as Nebius and CoreWeave as mainly serving tech customers with capacity tailored for AI.
Reuters also reported that investors have started betting against US neocloud and data center companies after fears that their debt-fueled AI buildout was unsustainable triggered a selloff. Investors are demanding higher yields on AI infrastructure-related corporate bonds over concerns about the volume of new debt, SiliconANGLE reported, citing Reuters.
Nvidia (NVDA): The Chip Supplier Behind SpaceX's GPU Order
The order points back to Nvidia (NVDA). Reuters reported earlier this month that SpaceX was in talks with banks and asset managers to raise $40 billion to buy Nvidia AI chips, and SiliconANGLE says the financing is for GPUs from Nvidia and other suppliers. SiliconANGLE also noted that a wave of neocloud failures could reduce demand for AI chips and affect suppliers such as Nvidia.
The wider AI spending race is large. Per SiliconANGLE, Morgan Stanley forecast in June that capital expenditure by AWS, Microsoft, Google and Meta would reach $700 billion this year and more than $1 trillion in 2027, and projected global AI-related debt issuance above $570 billion this year. Goldman Sachs projected borrowing by those companies of $250 billion this year and $400 billion in 2027. AWS, Microsoft and Google are scheduled to report earnings this week, the outlet added.
This article is for education and information only and is not investment advice. Investment decisions are yours to make after your own research.
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M. Alfathan Rahman is a content writer with over 3 years of experience developing digital content strategies across various industries, including fintech. He has experience producing content for tax-related websites and financial education platforms. His focus areas include data research, and crafting financial articles that are informative, accurate, and accessible to investors of all experience levels.
Hendrie Saputra holds a Master of Business Administration (MBA) with a concentration in Business Risk & Finance, along with professional experience in finance, marketing, and project management. He is experienced in analyzing market data and developing research-driven business strategies.
