Elon Musk, CEO of SpaceX and Tesla. [Reuters]
Elon Musk, CEO of SpaceX and Tesla. [Reuters]

Market wariness over "AI debt" is growing as SpaceX joins Oracle and Meta in raising large sums to fund AI infrastructure, with companies increasingly turning to corporate bonds and loans when their own cash falls short. As borrowing announcements tied to AI investment multiply, share prices and credit markets for the companies involved are reacting with heightened sensitivity.

According to the financial investment industry, SpaceX is pursuing $40 billion in financing to purchase Nvidia AI chips — $10 billion through bank loans and $30 billion through investment-grade corporate bonds. The move follows a $25 billion bond issuance in June, making this a second round of borrowing. Reuters reported that SpaceX is in discussions with banks and asset managers, with PIMCO also taking part in the talks.

News of the large-scale borrowing plan triggered moves in both the share price and credit markets. SpaceX's share price fell 2.5 percent Wednesday (local time), according to Reuters. On the same day, the five-year credit default swap premium for SpaceX rose to 194 basis points, then climbed further to 197.6 basis points during trading Thursday — a new high since trading began in June. The shares had been on an upswing after SpaceX's Starship successfully completed its first orbital flight during its 14th test flight, but gave back those gains with the 2.5 percent drop Wednesday.

SpaceX's need for massive capital stems from its rapidly expanding AI business. AI-related sales in the second quarter reached $2.6 billion, up 247 percent from the same period last year — roughly one-third of total sales of $7.8 billion.

Capital expenditure is scaling up alongside revenue. SpaceX's capital expenditure in the second quarter totaled $18.4 billion, of which $15.8 billion went into AI infrastructure — about 86 percent of the total. Spending on data centers and AI computing facilities is growing faster than AI revenue itself.

Cash generated from existing businesses is also being channeled into AI. Revenue from Starlink and rocket launch operations is being directed toward AI data centers and Nvidia chip procurement. The company's current AI operations are centered on ground-based data centers, while plans to build data centers in space remain a long-term ambition.

SpaceX expects to recoup its AI infrastructure investment in under a year. Chief Financial Officer Brett Johnson said the payback period could be less than 12 months. However, a gap exists between the company's expectations and market estimates. Independent US research firm MoffettNathanson put the payback period at roughly 18 months.

SpaceX is far from alone in pouring vast sums into AI chips and data centers. Bond market fundraising by so-called "AI scalers" is also rising rapidly. Reuters reported Thursday that AI-related companies are competing for limited capital as they embark on large-scale borrowing. According to Bloomberg, hyperscalers, data centers and other AI infrastructure projects raised $370 billion in the corporate bond market this year, already surpassing last year's full-year total of $125 billion.

Warnings about AI infrastructure debt are also multiplying. Nigel Green, CEO of deVere Group, said AI buildout "started with cash but is increasingly being funded by credit, and credit changes the risk structure entirely," according to Reuters. He added that "debt has to be repaid on schedule, regardless of whether revenue actually materializes."


kacew@heraldcorp.com