Key points
- Musk says SpaceX secured $40 billion to buy AI chips
- SpaceX's final financing terms remain undisclosed
- CoreWeave and Nebius have fallen more than 30% in October
SpaceX (SPCX) has completed $40 billion in debt financing to buy AI chips, Elon Musk said on X on Oct. 25. He credited revenue from Starlink and rocket launches with helping SpaceX borrow as financing becomes harder to obtain for companies dependent on AI data centers.
Musk predicted that most of the more than 200 companies renting out AI computing power, known as neoclouds, would fail or be acquired.
"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," Musk wrote. He said SpaceX could still borrow because "we're investment grade and have Starlink & launch revenue."
"That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many," he wrote.
SpaceX also sells AI computing capacity. Anthropic's agreements with SpaceXAI, the company formed when SpaceX merged with Musk's xAI in February, could lead to up to $84.5 billion of spending on computing capacity through 2029, as we reported in September. That puts SpaceX in competition with neoclouds such as Nscale for the same customers.
SpaceX hasn't disclosed the final financing terms. Musk didn't name the lenders, specify the interest rates, or explain how the borrowing was structured.
Reports last week described unfinished financing talks
Semafor reported on Oct. 22 that the lowest-rated portion was expected to carry interest of about 8.3%. A safer portion, backed by some of the chips, was expected to price near 7.75% the following week.
A day later, Bloomberg reported that turmoil in AI credit markets had reopened negotiations over pricing.
The proposed deal put Goldman Sachs in charge of financing talks with investors led by Apollo Global Management. A separate entity would borrow the money and buy the chips, with the aim of keeping the debt off SpaceX's balance sheet and preserving SpaceX's investment-grade credit ratings. Musk didn't say whether the completed financing used that structure.
Musk warns of unfinished data centers
Musk's financing announcement followed a warning about AI infrastructure. Late on Oct. 24, he wrote, "I think we're going to see a lot of stranded compute in partially complete data centers."
Venture investor Chamath Palihapitiya quoted the post the next day. Palihapitiya, who said he owns a portfolio of land already connected to power, described neoclouds as "disorganized and poorly capitalized." He predicted that more computing equipment would sit unused or in unfinished facilities in 2027 than current forecasts suggest.
"2027 will be a turbulent year because it will clear out a bunch of wrong/bad bets," Palihapitiya wrote. Musk replied about three hours later, starting with "Pretty much."
Neocloud stocks fell hard in October
CoreWeave (CRWV) closed at $54.24 on Oct. 23, down 37.7% from its Sept. 30 close. Nebius (NBIS) closed at $158.74 on Oct. 23, down 32.7% from its Sept. 30 close, by our calculations from Yahoo Finance data.
CoreWeave's bonds traded at a median yield spread of 10.56 percentage points over U.S. Treasuries on Oct. 22, the widest since our daily readings began on Oct. 8. Those readings feed the borrowing-cost part of our AI Bubble Index.
Gartner predicted earlier in October that 80% of neoclouds could stop operating as independent companies. The firm's chief forecaster, John Lovelock, told CNBC on Oct. 19 that neoclouds wouldn't go out of business all at once but could face consolidation through takeovers and mergers.
Nebius has raised rental prices even as its shares have fallen. Its Oct. 1 increase of 17% to 21% for Nvidia GPUs was its second in three months, as we reported in Nebius's price increase.
Oct. 26 is the first trading session since Musk's post.
