Apollo Capital Management and various banks are in discussions with SpaceX regarding a substantial $40 billion acquisition of Nvidia graphics processing units (GPUs). This financing is expected to primarily utilize the investment-grade debt market, which SpaceX recently accessed through a $25 billion bond sale shortly after its IPO in June.
Despite the high demand for SpaceX's previous bond issuance, the current market for AI-related bonds has softened, with widening credit spreads indicating increased caution among investors. The financing for this GPU purchase may involve using the GPUs as collateral, with Apollo Capital playing a key role in the arrangement.
The credit industry anticipates that GPUs will retain their value for approximately seven years, driven by ongoing scarcity in computing power. This deal is notable not only for its size but also as it follows similar bond issuances from major tech companies like Meta, Amazon, and Google, highlighting the rising costs associated with AI investments.
As fixed-income investors seek higher yields, the market is becoming more selective regarding AI-related debt, which could influence future financing strategies across the sector