SpaceX Could Borrow $40 Billion for Nvidia Chips as Musk Makes a Massive New Bet on AI. Its Stock Fell.

SpaceX is reportedly preparing to borrow as much as $40 billion to finance a massive purchase of Nvidia chips, a move that would dramatically expand the Elon Musk-led company's bet on artificial intelligence infrastructure while adding billions of dollars to its debt load.

SpaceX is exploring a financing package consisting of roughly $10 billion in bank loans and another $30 billion in investment-grade bonds, according to Bloomberg. Apollo Global Management is leading the financing effort, while bond giant PIMCO is among the investors considering participating in the deal, the outlet noted.

The money would primarily be used to purchase Nvidia's high-end AI processors for SpaceX's rapidly expanding data center operations. SpaceX shares slipped on Wednesday following news of the potential borrowing as investors weighed the company's increasingly aggressive AI spending against the revenue being generated by its newer computing business. The stock fell almost 4% close to noon.

The company has increasingly positioned AI computing as another major business, building enormous data centers capable of supplying computing power to customers training and operating artificial intelligence models.

Its Memphis, Tennessee, data centers, known as Colossus 1 and Colossus 2, are already generating billions of dollars in monthly recurring revenue from AI computing services, according to company disclosures.

SpaceX Chief Financial Officer Bret Johnsen told investors last month that the company believes it is on track to reach $100 billion in annual recurring revenue, or ARR. "We're on track, or we believe we're on track, to hit $100 billion ARR," Johnsen said.

The CFO also disclosed another hosting agreement expected to begin generating approximately $1.11 billion in monthly revenue starting Dec. 1. That contract alone would represent roughly $13 billion in additional annual recurring revenue.

The growth helps explain why SpaceX may be willing to take on tens of billions of dollars in new borrowing to acquire Nvidia processors. Demand for the company's most powerful AI chips has surged as technology companies race to build increasingly large computing clusters.

Still, a $40 billion financing package would raise questions about leverage at SpaceX, particularly relatively early in its life as a publicly traded company. Yorkville analyst Dan Ives, a longtime SpaceX bull, argued Wednesday that the company's growing AI backlog and cash generation from Starlink could support the additional debt.

"The debate is whether a company this early in its public life should carry that much leverage," Ives wrote in a research note. "We think the contracted backlog in AI and the cash generation of Starlink give SpaceX the capacity to service it, and we would rather see this compute financed and deployed than deferred."

Ives maintains an Outperform rating on SpaceX with a $225 price target, describing the potential financing as additional "firepower" for the company's AI expansion. The borrowing plan also arrives as Wall Street grows increasingly focused on the extraordinary amount of capital required to compete in AI.

Morgan Stanley analyst Adam Jonas said earlier this week that SpaceX shares appeared "cheap" and argued investors should consider buying ahead of the company's upcoming Starship 15 launch, which is expected as soon as late October or November.