Market participants say worries about artificial intelligence (AI) are adding about 200 basis points of credit spread to SpaceX’s recent financing. When SpaceX issued its first corporate bonds roughly four months ago, the most expensive slice carried about a 6.65% coupon; a person familiar with the matter says the priciest tranche of the roughly $40 billion private credit package finalized in recent days may cost as much as 8.75%.
What explains the gap?
Part of the increase is monetary: at least 25 basis points can be attributed to the Federal Reserve’s September rate hike and market expectations of another hike before year-end. The remainder, however, reflects pure market nerves — investors are increasingly uneasy about the return on investment from AI and about borrowers’ ability to repay.
Those roughly 200 basis points of extra spread translate into hundreds of millions of dollars in additional borrowing costs, which cannot be blamed solely on Fed moves or a general retrenchment among lenders.
Elon Musk and the market reaction
Elon Musk described the financing as evidence of SpaceX’s strength on X (formerly Twitter), while downplaying the eye‑watering cost. In a post, he said that in recent weeks debt markets had almost entirely shut off access to money for any company without substantial revenue independent of AI data centers, and argued that SpaceX is investment grade and benefits from Starlink and launch revenues. Despite that, the market is pricing a BBB‑rated company as if it were two notches lower.
Credit markets tightening and contagion risk
An executive at an AI infrastructure fund told the author there is a “supply‑demand imbalance”: AI needs a lot of capital at the same time investors are taking a breather. For now, the anxiety about AI seems concentrated among credit investors, who tend to be more cautious than equity holders. But fear can spread; if equity markets follow, the impact could be swift and severe.
Pablo Salame, co‑CIO of Citadel, told Bloomberg that the credit market is “getting jammed” because it has not yet found a good way to offload AI‑related risks. He warned that AI’s rising tide will sink some boats and that the tide will be wavy.
Why this matters
A jump of this magnitude in borrowing costs can affect corporate investment decisions and slow the pace of capital‑intensive technology projects, including AI infrastructure that requires significant upfront spending. SpaceX’s example shows that even companies with visible revenue streams are not immune to market skepticism about AI, and that financing terms can deteriorate quickly when investors become more risk‑averse.
(Facts based on the source: the most expensive slice of SpaceX’s first corporate bonds was about 6.65% roughly four months ago; the priciest part of the roughly $40 billion private credit package may be as high as 8.75%; at least 25 basis points of the increase are linked to the Fed’s September move; market participants cite roughly 200 basis points of AI‑related risk.)
