SpaceX (SPCX) stock fell in early trading Wednesday amid reports the Elon Musk-led space and AI company is reportedly poised to tap debt markets in a big way.
Bloomberg reported that SpaceX plans to issue $40 billion in new debt to buy Nvidia chips for its data centers. According to the report, the split would represent $10 billion in bank loans and $30 billion in investment-grade debt, with bond investment giant PIMCO reviewing the deal and Apollo Global leading the financing. (Disclosure: Yahoo is a holding company for funds managed by affiliates of Apollo Global Management.)
SpaceX stock was down 2% in early trading.
166.85 -5.07 (-2.95%)
At 1:24:27 p.m. EDT. Open market.
Data center activity has been good for SpaceX. The company’s data centers in Memphis, Tennessee, dubbed Colossus 1 and 2, generate billions in monthly recurring revenue from AI computing services.
Last month, SpaceX CFO Bret Johnsen investors updated on the size of the company’s AI computing business.
“We’re on track, or we think we’re on track, to reach $100 billion ARR,” Johnsen said of SpaceX’s overall annual recurring revenue target, with AI compute deals helping to fuel the growth. “What I would like to tell you, an update, is that just earlier this month we entered into another hosting agreement, and that translates to about $1.11 billion per month as of December 1 of this year, or about $13 billion more in ARR.”
It’s a big feather in the cap for SpaceX, which has traditionally relied on rocket launches and the Starlink internet service as its main revenue drivers.
Yorkville Ives analyst Dan Ives, a notable SpaceX bull on Wall Street, said the deal provides “firepower for (SpaceX’s) AI development,” even as the debt picture rises.
“The debate is whether a company so young in its public life should have such leverage. We believe the delay in Starlink’s AI and cash generation gives SpaceX the ability to service it, and we would prefer to see this compute funded and deployed rather than delayed,” Ives said in a note released Wednesday morning.
Ives has an Outperform rating on SpaceX and a $225 price target.
Earlier this week, Adam Jonas of Morgan Stanley wrote that SpaceX stock was “cheap” and now is the time to buy ahead of the next Starship 15 launch, likely scheduled for late October or November.
Pras Subramanian is a senior transportation reporter for Yahoo Finance. You can follow it X and on Instagram.
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