SpaceX seeks $40 billion in debt financing led by Apollo to purchase Nvidia chips

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SpaceX is seeking to raise $40 billion through a debt financing plan led by Apollo Global Management to purchase Nvidia chips. The transaction is expected to be completed in 2027.

The financing structure reportedly includes approximately $10 billion in bank loans and $30 billion in investment-grade bonds. Apollo is expected to lead the transaction and help sell the debt to a wide investor base. Pimco is one of several lenders in discussions that may provide funding for the deal. Apollo and Pimco declined to comment, while SpaceX and Nvidia did not immediately respond to requests for comment.

SpaceX holds a BBB credit rating, which is the second-lowest tier of investment-grade ratings. This rating allows insurance companies and pension funds to purchase its bonds, whereas these funds typically have more limited allocations for high-yield debt. The company received this investment-grade rating shortly after its initial public offering in June, which raised $86 billion. Less than two weeks after the offering, SpaceX issued $25 billion in high-grade bonds. However, these bonds experienced selling pressure in the following days due to investor concerns over the company's increasing debt and high capital expenditures.

According to MarketAxess data, SpaceX bonds maturing in 2056 currently trade at approximately 85 cents on the dollar. The yield on these bonds is about 2.27 percentage points higher than U.S. Treasury yields, a level comparable to high-yield bonds. Limited financial disclosure by Elon Musk has previously made some investors cautious about purchasing SpaceX debt. Investors who were previously approached to finance the company's multi-billion dollar chip purchases reported receiving only a brief two-page transaction memo. This memo included space images and arrows indicating plans to build data centers in a location in space. One investor questioned how such a document could be presented to an internal investment committee for approval.

Apollo has made lending to high-grade companies a major pillar of its $800 billion credit business. The firm has led multi-billion dollar financing transactions for groups such as Intel and Bayer. Its life insurance and annuity affiliate, Athene, typically purchases a significant portion of these issuances. In June, Apollo also led a $35 billion chip financing transaction to purchase processors made by Broadcom, which was the largest private credit deal at the time.

In August, Nvidia announced it is working with major Wall Street institutions to create a $500 billion financing platform. The company has signed memorandums of understanding with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR. This consortium aims to establish a pool of third-party capital to finance the purchase of Nvidia chips and broader artificial intelligence infrastructure, helping smaller clients reduce financing costs. Nvidia may provide support for up to 25 percent of the value of the chips.

This transaction will further strengthen the relationship between SpaceX and Nvidia. Elon Musk has previously committed to increasing investment in Nvidia technology for his artificial intelligence projects. During a SpaceX earnings call in August, Musk stated that the company decided to build entirely on Nvidia because it considers the Vera Rubin architecture to be the best. He described it as the best artificial intelligence computer and emphasized the importance of a close partnership with Nvidia at multiple levels. This deal is also a victory for Nvidia, which faces increasing competition from other chip manufacturers attempting to challenge its dominance in advanced semiconductors.