Broadcom and SpaceX seek $90 billion for AI chips while 10-year Treasuries yield 5.3%

Add Broadcom's request to SpaceX's and the total is $90 billion ^[22], before counting Oracle, the third company named in the reports ^[2]. The money is for chips. Spending on AI equipment could lift earnings at semiconductor and memory makers, the report noted ^[10]. On the same day Samsung projected third-quarter operating profit of 107.4 trillion won, about $80.17 billion, up 783% ^[11]. Two companies are seeking about 1.1 times one quarter of one memory maker's operating profit ^[26].

The strain sits at the long end. The 2-year Treasury yield held at 4.78% on the prospect of a pause in Fed tightening ^[15], while the 10-year traded at 5.298% ^[14], about 52 basis points higher ^[23]. The report described the tech borrowing as direct competition for limited funding ^[20], at a time when sovereign markets are tested by inflation fears and widening budget deficits ^[12].

The reports did not include maturities or pricing. As a floor, $30 billion borrowed at the 10-year Treasury rate costs about $1.59 billion a year in interest ^[25], before any premium for SpaceX's own credit.

Nigel Green, chief executive of deVere Group, warned of a loop in which Nvidia bankrolls the customers who buy its products ^[6]. "The AI build out started on cash," Green said. "It's increasingly running on credit, and credit changes the risk profile entirely." ^[7] He added: "Debt has to be repaid on schedule, whether the revenues show up or not." ^[8] On the reported terms, every dollar of SpaceX's $40 billion plan is borrowed, 75% of it through bonds ^[21][27].

One outcome is that bond buyers absorb government and corporate supply together. Another is that the extra cost stays with the AI borrowers. A third is a December Fed hike, priced by markets at 80% ^[17], that would lift every borrower's rate at once. Goldman Sachs expects that hike but wrote that it sees "a strong chance the Fed ultimately concludes further tightening is unnecessary" ^[18].

I think the second fits the day's evidence best. The 10-year sat about 3 basis points under its 24-year top of 5.326% ^[24][14], while SpaceX's own credit took the hit ^[5]. The counter-case is that this is one day of trading, and Europe's sovereign markets were weakening at the same time as concern over France's finances spread to Italian and Greek debt ^[19]. If the 10-year breaks back through 5.326% as the Broadcom and SpaceX deals come to market, the competition is landing on governments ^[14]. If SpaceX's bonds sell and the price of insuring its debt falls back, the extra cost stayed with SpaceX ^[5].