SpaceX’s AI financing deal may carry higher borrowing costs, report says

SpaceX’s latest AI funding move

Yahoo Finance reports that SpaceX has intensified its push into AI as companies spend heavily on the computing power needed for advanced models. The article says SpaceX, which expanded further into AI after acquiring xAI, is drawing more scrutiny because investors are not only watching how much it spends, but also how expensive it is to raise the money.

The focus of the report is SpaceX’s latest financing arrangement for roughly $40 billion in GPUs. Yahoo Finance says reports indicate that this capital is coming at a higher cost than the debt SpaceX issued in June, in a period when debt tied to AI projects has been under pressure.

What the deal is for and how it is structured

According to Yahoo Finance, SpaceX announced on Monday that it had secured a binding commitment for about $40 billion in GPU financing through a master finance lease with an entity managed by Apollo Global Management. The equipment will be used to buy Nvidia Vera Rubin GPUs and related hardware.

Under the structure described in the article, the Apollo-managed entity will purchase the equipment and then lease it to SpaceX. Deliveries will happen in stages, and individual leases are expected to begin in the first half of 2027. Each lease is expected to last a little more than five years from delivery, with SpaceX making quarterly payments over the term.

Yahoo Finance says the aggregate principal payments are expected to total about $40 billion, not including interest and other expenses. The article adds that quarterly payments will generally equal one-twentieth of the equipment’s financed cost, plus interest at a fixed annual rate on the unpaid lease balance and certain other costs. The fixed rate will be set during pricing before SpaceX formally enters the agreement. SpaceX expects to complete the deal by year-end, subject to closing conditions.

Why the article says this is not a simple bond issue

The report says some headlines described the arrangement as $40 billion of debt, and SpaceX CEO Elon Musk also wrote on X on Sunday that the company had closed $40 billion in debt. Yahoo Finance says that description can be misleading because, from SpaceX’s side, the deal is structured as a finance lease.

At the same time, the capital supporting the lease is reportedly being raised from institutional investors through a Rule 144A bond offering. Yahoo Finance cites Bloomberg as reporting that the bonds will be sold in multiple tranches, and that Pimco will buy $4 billion of the A2 tranche, which sits between the senior and junior portions of the package.

The article says the financing vehicle will use investor money to buy the GPUs and lease them to SpaceX. SpaceX then makes quarterly lease payments that include principal, interest at a fixed annual rate, and other expenses. Those payments are then used by the financing vehicle to meet its obligations to bondholders across the different tranches.

The reported borrowing cost and what it means

Yahoo Finance says the bond yields do not necessarily match the fixed annual rate SpaceX itself pays under the lease, because each tranche has a different level of risk and a different yield. Even so, the article says the reported pricing suggests the financing is expensive.

Citing Semafor, Yahoo Finance says the most expensive part of the offering, the junior tranche, could carry a rate as high as 8.75%, compared with 8.3% reported the previous week. The article says that is also well above the 6.65% SpaceX paid on its most expensive bonds issued four months earlier. It adds that the debt package is reportedly expected to yield roughly 7.75% to 8.75% overall.

The article says those figures indicate investors are demanding a larger premium to fund AI infrastructure, although it warns not to confuse the 8.75% junior-tranche yield with the fixed rate SpaceX will pay under the lease. Still, Yahoo Finance says SpaceX could end up facing a higher borrowing cost under this lease than on its earlier debt offering.

Why SpaceX may prefer this structure

Yahoo Finance says the lease may be more attractive than another traditional bond sale. The article says issuing another $40 billion in corporate bonds so soon after SpaceX’s $25 billion June offering could put more pressure on the company’s unsecured credit profile, especially while debt markets for AI-related companies have been unsettled.

The report notes that SpaceX holds investment-grade ratings from the three major credit rating agencies, but that its own debt has recently fallen in price. SpaceX said the structure “diversifies our funding sources,” according to the article.

Yahoo Finance also says the lease ties payments more closely to cash flow because SpaceX will not receive the full $40 billion upfront or start paying interest on all of it immediately. Instead, lease payments begin as GPUs and related equipment are delivered starting in the first half of 2027, so the obligations ramp up alongside the equipment deployment.

The article also points out a downside: the amortization schedule is relatively fast. SpaceX said each lease will last a little more than five years, with quarterly payments throughout, which means principal would be repaid much faster than on the company’s June bonds, which mature between 2031 and 2056.

The remaining question for investors

Yahoo Finance says the higher borrowing costs are a concern, but not necessarily a decisive warning sign. The article states that whether the financing is manageable depends on whether SpaceX’s AI investments continue to produce strong returns.

The report says SpaceX said it is seeing “less than one-year payback periods” on its AI investments. Yahoo Finance says that claim suggests the returns from the company’s AI infrastructure could outweigh the financing expense. The article ends by saying the central question is not just whether SpaceX is paying more to borrow, but whether it can keep those short payback periods as it spends tens of billions more on computing capacity.

The piece also notes that, on the publication date, author Oleksandr Pylypenko did not directly hold any position in the securities mentioned, and that the article was originally published on Barchart.com.