(Oct 26): Elon Musk said SpaceX has closed a US$40 billion (RM163 billion) debt deal to pay for the chips it needs to fuel its artificial intelligence (AI) ambitions. 

SpaceX finalised the debt raise to pay for Nvidia Corp’s graphics processing units, or GPUs, thanks to its investment-grade ratings and revenue from its Starlink satellite business and rocket launches, Musk wrote in a post on X, discussing the off-balance-sheet deal. 

However, people familiar with the matter said the parties were still engaged in pricing discussions as of Sunday and the deal had not yet closed.

In noting SpaceX’s diversified business, Musk sought to differentiate the company from so-called neoclouds that sell high-end computing power to technology companies. Such firms have come under intense scrutiny in the past two weeks over their heavy borrowing and demand prospects.

“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 centres,” Musk said in his post. “The 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.” He later said that SpaceX won’t buy any neoclouds, calling it “pointless”.

SpaceX hasn’t been completely immune to growing concerns over the AI infrastructure boom. Discussions over the final pricing for its off-balance-sheet structure for US$40 billion in chip financing were caught in the middle of the recent neocloud market turmoil, Bloomberg reported Friday.

Bankers led by Goldman Sachs Group Inc had been discussing the structure with investors led by Apollo Global Management Inc, with Apollo-backed Atlas SP slated to manage the entity, people familiar with the matter said, asking not to be identified discussing private information. Pacific Investment Management Co had also considered investing, according to the people. The debt was expected to be issued in the form of private placements called 144a, the people said. 

With the latest structure, SpaceX would avoid a repeat of a financing attempt last year by Musk’s AI startup, xAI. In that deal, an entity sought as much as US$20 billion of off-balance sheet debt through a sale-leaseback agreement with Valor Equity Partners. But SpaceX ultimately had to record about US$13 billion of that debt after it was declared a “failed sale-leaseback arrangement”, according to SpaceX’s latest earnings report.

The debt raise comes after strong third quarter earnings, with SpaceX’s AI unit turning a profit for the first time. The enterprise is increasingly driving revenue by selling computing power from its Memphis data centres to external AI labs and hyperscalers.

During SpaceX’s earnings call, chief financial officer Bret Johnsen indicated that the company was in discussions with lenders over further borrowing.

“We have a lot of conviction that we are going to be able to do this in a very measured fashion and continue to keep ourselves in that IG status along the way,” he said, pointing at the firm’s investment-grade rating.

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