Musk says SpaceX raised $40 billion in debt deal, predicts neocloud shakeout

Oct 25 : Elon Musk said on Sunday that SpaceX had closed $40 billion in debt financing for graphics processing units, underscoring the soaring cost of building AI computing capacity. 

Musk, in a post on X, attributed the successful debt raise to the company's investment-grade status and revenue from its Starlink satellite internet and launch businesses. 

It was not immediately clear from Musk’s post what he meant by the deal being “closed” or whether investors had agreed to pricing for the debt.

"This is primarily callable debt for GPU purchases that will arrive in Q1 and Q2. Not a major factor this quarter," Musk said in the post.

For the fourth quarter, the company expects $35 billion to $40 billion in capital expenditure, according to Chief Financial Officer Bret Johnsen.

Reuters reported earlier this month that SpaceX was in talks with banks and asset managers to raise $40 billion for the purchase of ​Nvidia artificial intelligence chips.

The ​funding highlights the enormous capital requirement of the AI boom, as technology companies ​race to secure advanced processors and build out the computing infrastructure needed to support ‌AI ⁠development.

Musk said debt markets "have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers."

As a result, he predicted neocloud companies would face significant consolidation and failures, and later said SpaceX won't buy any neoclouds, calling it “pointless.”

Unlike larger cloud ​firms that serve ​a broad range ⁠of industries, neoclouds such as Nebius and CoreWeave mostly focus on tech customers and offer capacity tailored for AI technology.

Investors have started betting against US neocloud and data center companies, after fears that their debt-fueled AI buildout was becoming unsustainable sparked a selloff.

AI INVESTMENT, CHIP MANUFACTURING

SpaceX's revenue climbed 161 per cent from a year ago to $14.58 billion for the three months ended September 30. AI revenue surged by almost 10 times to $7.56 billion, the clearest evidence yet that SpaceX’s heavy investment in AI was paying off.

The shift is reshaping a company whose financial engine has long been its Starlink satellite internet services business and whose longer-term ambitions still hinge on getting Starship rockets into regular service. 

Terafab, the chip manufacturing joint venture between SpaceX and Tesla in Austin, should produce its first test chip around May or June of next year as it aims to ‌reach volume production by the third quarter of 2028. 

Musk told investors in a conference call last week that a merger of his two companies would be "a good idea," citing growing overlap between them.

Prior to its blockbuster IPO, SpaceX listed "manufacturing our own GPUs" among the substantial capital expenditures it is undertaking in its S-1 statement, warning prospective investors of its big spending plans to develop AI and other technologies.