‘Guppy-level death’: Musk claims US$40 billion chips debt closed

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The client was not given the opportunity to put restrictions on the content or review it prior to publication. by BDC'Guppy-level death': Musk claims US$40 billion chips debt closedThe debt raise comes after strong third quarter earnings, with SpaceX’s AI unit turning a profit for the first timeAuthor of the article:Last updated 6 minutes ago SpaceX, which is rated investment-grade by the three largest credit graders, has seen the price of its own debt tumble in recent weeks. Photo by Justin Sullivan/Getty ImagesElon Musk said SpaceX has closed a US$40 billion debt deal to pay for the chips it needs to fuel its artificial intelligence ambitions. People familiar with the discussions, though, told Bloomberg News that talks over pricing were still ongoing.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“SpaceX closed US$40B of debt for GPUs,” Musk wrote in a post on X, referring to Nvidia Corp.’s graphics processing units. He went on to suggest that debt markets had all but shut for neoclouds depending solely on revenue streams from AI data centres. “That means the 200+ neoclouds are going to see guppy-level death and consolidation,” Musk wrote. “Some will make it through, but not many.”This advertisement has not loaded yet, but your article continues below.Musk’s comments came on the heels of a tumultuous week for the AI industry in debt markets as concern mounted over the rapid spending, and limited profits so far to show for it. With investors demanding increasingly large premiums to finance the AI buildout, the volatility roiled pricing discussions over the SpaceX debt, which is being structured as private bonds to be issued by an off-balance sheet entity.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againAs of late Sunday in New York, those conversations remained ongoing and the deal hadn’t priced, people with knowledge of the discussions said. The parties are still working on finalizing the debt package in the coming days, they said.More broadly in markets recently, much of the investor angst has been focused on the so-called neoclouds, which sell high-end computing power to technology companies. Noting SpaceX’s revenue from its Starlink business and rocket launches, Musk sought to differentiate his company from those businesses.“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. He later said that SpaceX won’t buy any neoclouds, calling it “pointless.”This advertisement has not loaded yet, but your article continues below.SpaceX, which is rated investment-grade by the three largest credit graders, has seen the price of its own debt tumble in recent weeks. Credit-default swaps tied to SpaceX, which are used to insure against losses on the company’s debt, surged last week to a record 266 basis points at the close of trading Friday, a level more typical of a junk-rated borrower.Bankers led by Goldman Sachs Group Inc. have been discussing the chips debt 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 last week, asking not to be identified discussing private information. Pacific Investment Management Co. has 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.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.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.—With assistance from Lynn Doan.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.