InvestNot yet confirmed elsewhere1 publisher2 min readPublished
SpaceX's investment-grade June bond now trades like junk
SpaceX is seeking $40 billion from Apollo and banks for Nvidia GPUs through private credit, after its $25 billion June bond slid to a junk spread. Demand for AI paper is still deep, but the collapse of the Firmus IPO shows the appetite has limits.
The Investor · Invest desk
What happened
- Lenders put in $90 billion of orders for the June note, roughly 3.6 times what SpaceX sold.
- SpaceX's own IPO raised $86 billion, the largest of the AI boom so far, equity it never repays or pays interest on.
- The broad BB-rated junk spread over Treasuries sits near 1.94 points, against more than 8 in March 2020 and nearly 15 at the depth of the financial crisis.
- AI builders are adding about $500 billion of debt this year, some of it moved off balance sheet into SPVs, leases and purchase commitments.
Why it matters
- cost SpaceX would owe roughly $65 billion once the new loans close, every dollar interest-bearing and due whether or not the Nvidia GPUs it is buying ever generate matching revenue.
- constraint Lenders must absorb the AI debt alongside a US government funding about $2 trillion of deficits a year and one-off deals like the $52 billion of borrowing behind the Warner Bros. Discovery takeover.
- exposure A private loan book, unlike a traded bond, concentrates any shortfall in the funds and banks that hold it rather than spreading it across index investors.
When SpaceX sold the 10-year slice in June, the Treasury was around 4.7% and the note carried a 5.875% coupon, so buyers were paid about 120 basis points over the government for credit Fitch rated BBB+ and S&P rated BBB, the low edge of investment grade [1][2]. The Treasury is now 5.25% and the note trades at 90 cents on the dollar, according to TradingView [3]. Of the roughly 132 basis points the yield has gained, about 55 came from Treasuries moving and close to 80 from the market charging more for SpaceX itself [18][17][19]. The spread is near 200 basis points now, around where BB-rated junk trades, so a bond still carried at the low end of investment grade changes hands like high-yield paper [4].
The next $40 billion is set to come from private credit and banks rather than that bond market, with Apollo Capital Management among the lenders CNBC named for the GPU purchase [11][8]. A private loan does not trade on a screen each day the way the June bond does. SpaceX can raise the money without a daily quote telling the market what its credit is worth.
The open question is whether any of this gets repaid out of AI revenue. Wolf Richter, who writes Wolf Street, wrote: "The revenue models of AI companies remain in fantasy land, as neither consumers nor businesses may ever be able to spend enough on AI to justify the planned AI capital expenditures" [24]. The Firmus listing is the one place that doubt turned up in a price, an Nvidia-backed Australian IPO that sought about $5.5 billion and was pulled [6].
If AI revenue arrives on the scale the capex assumes, the SpaceX widening is noise and the lenders collect a rich coupon. If it does not, the paper has to be refinanced, and at these yields that gets expensive fast. In my view the case worth watching is the one in between, where revenue is real but smaller than the spending and the bonds keep rolling at the higher yields. Then the IPO that gets pulled next is bigger than Firmus.
What to watch
- Whether SpaceX closes the $40 billion with Apollo and banks, and at what spread over Treasuries.
- Whether the eventual OpenAI and Anthropic IPOs price at AI-boom valuations or get marked down.
- Whether the broad BB spread holds near 1.94 points or widens as more AI debt arrives.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence58
- Adoption
- Insufficient
- Hype gap+15
- Incentives
- Insufficient
- Confidence52
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The $6 billion slice of 10-year senior unsecured notes carried a 5.875% coupon, nearly 120 basis points above the 10-year Treasury yield of about 4.7% at the time.
- [2]
The notes were rated at the low end of investment grade, BBB+ by Fitch and BBB by S&P Global; junk ratings start at BB+.
- [3]
The 10-year Treasury yield is now 5.25%, and the SpaceX note trades at 90 cents on the dollar with a yield of 7.20%, according to TradingView.
- [4]
The spread on the SpaceX note to Treasuries has widened to nearly 200 basis points, putting it in the BB-rated junk range, where the BB-to-Treasury spread is about 190 basis points.
- [5]
Investors are still chasing yield and demand for AI-related debt remains strong, with corporate bond spreads to Treasuries narrow by historical standards.
- [6]
The Nvidia-backed Firmus IPO in Australia, seeking to raise about US$5.5 billion, collapsed and was pulled.
- [7]
SpaceX's IPO was the biggest of the AI boom so far, raising $86 billion, capital the company never has to pay interest on or repay.
- [8]
SpaceX has been in talks with Apollo Capital Management and some banks to borrow $40 billion to purchase GPUs from Nvidia, according to sources cited by CNBC.
- [9]
SpaceX borrowed $25 billion in June via a bond sale spread across several maturities.
- [11]
For the next $40 billion, SpaceX appears to target loans via private credit and banks rather than the bond market.
- [12]
Some AI borrowing has shifted off balance sheet into SPVs, commercial leases and purchase commitments, with private credit elbowing in.
- [13]
The Paramount Skydance acquisition of Warner Bros. Discovery is funded by $52 billion in debt sales, including $44 billion of bonds, of which $12 billion are junk, leaving the combined company with about $80 billion in debt.
- [14]
The US government alone has to fund about $2 trillion in deficits a year.
- [15]
The ICE BofA BB US High Yield Index spread over Treasuries widened in early October to 2.04 percentage points and has narrowed to 1.94 currently, still near historic lows.
- [16]
In March 2020 the BB spread went over 8 percentage points, and during the Financial Crisis it topped out at nearly 15 percentage points.
- [17]
The 10-year Treasury rose about 55 basis points, from about 4.7% at issue to 5.25% now.
- [18]
The SpaceX note's yield rose about 132 basis points, from a 5.875% coupon to a 7.20% yield.
- [19]
SpaceX's own credit spread widened about 80 basis points, from roughly 120 at issue to nearly 200 now.
- [20]
The June bond's $90 billion of orders was about 3.6 times the $25 billion sold.
- [21]
Adding the planned $40 billion to the $25 billion sold in June would put about $65 billion of debt on SpaceX.
- [23]
The big AI companies alone are adding about $500 billion of debt this year.
- [24]
The revenue models of AI companies remain in fantasy land, as neither consumers nor businesses may ever be able to spend enough on AI to justify the planned AI capital expenditures.
Sources
1 independent publisher whose own reporting we read for this story.
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