$40 billion spent on GPUs! Elon Musk says SpaceX (SPCX.US) off-balance-sheet financing is settled, slams "new cloud" sector will be a bloodbath

According to Jinzi Finance APP, Elon Musk stated that SpaceX (SPCX.US) has completed a $40 billion debt transaction for chip procurement to support its artificial intelligence (AI) strategy.

Musk posted on the X platform about this off-balance-sheet financing, noting that thanks to its investment-grade credit rating and revenue from the Starlink satellite business and rocket launches, SpaceX ultimately completed this debt financing to pay for NVIDIA’s (NVDA.US) graphics processing units (GPUs). While emphasizing SpaceX's diversified business, Musk sought to distinguish the company from so-called “neoclouds” — companies that sell premium computing power to tech firms. In the past two weeks, such computing power cloud enterprises have faced intense market scrutiny due to high debt levels and uncertain demand prospects.

“Over the past few weeks, the debt market has almost cut off all funding channels for companies unable to separate themselves from AI data centers and build independent, stable revenue streams,” Musk said in the post. “More than 200 neocloud companies are about to experience major consolidation and shakeout, with only a handful likely to survive.” He later said that SpaceX would not acquire any neocloud firms, calling such a move “pointless.”

Based on Musk’s post last Sunday, it remains unclear exactly which deal he referred to as “finalized,” nor is it known if investors have agreed on the terms of the debt pricing.

SpaceX is not entirely immune to growing concerns about the AI infrastructure boom. According to reports from last Friday, negotiations around the final pricing of its $40 billion off-balance-sheet chip financing are being affected by current volatility in the neocloud sector.

Sources familiar with the matter said that bankers led by Goldman Sachs have been discussing the structure with investors headed by Apollo Global Management, which supports Atlas SP in managing the vehicle. The sources, who requested anonymity due to the private nature of the discussions, also said that Pacific Investment Management Company (PIMCO) had considered investing. The debt is expected to be issued in the form of a private placement known as 144A.

With the latest structure, SpaceX will avoid repeating the setbacks faced by Musk’s AI startup xAI during its fundraising attempt last year. In that deal, an entity sought to raise up to $20 billion in off-balance-sheet debt through a sale-leaseback agreement with Valor Equity Partners. But according to SpaceX’s most recent financial report, after that arrangement was classified as a “sale-leaseback that did not satisfy sale criteria,” SpaceX ultimately had to record approximately $13 billion of the debt on its balance sheet.

Prior to this debt financing, SpaceX had just delivered a strong third-quarter financial report, with its AI division turning a profit for the first time. This business is increasingly driving revenue growth by selling computing power from its Memphis data center to external AI laboratories and hyperscale cloud service providers.

On the SpaceX earnings call, Chief Financial Officer Bret Johnson stated that the company is discussing further financing with lenders.

“We are very confident that we can do this in a very disciplined way and continue to maintain our investment-grade status in the process,” he said, highlighting the company’s investment-grade rating.