What happened

SpaceX is in talks with banks and investors to raise about $40 billion to buy artificial intelligence chips from Nvidia, the Financial Times reported on Tuesday, citing people familiar with the matter. The package would combine about $10 billion of bank loans with $30 billion of investment-grade debt. Apollo Global Management is expected to lead the deal and help place the debt with investors, and the bond giant Pimco is among the lenders in talks, according to the FT and Bloomberg.

Why a rocket company is buying AI chips

SpaceX absorbed Elon Musk's artificial intelligence company, xAI, in an all-stock deal in February, ahead of its stock market listing. Musk said last month that xAI's Colossus 2 data centre, which already holds 110,000 Nvidia GB200 chips and 440,000 GB300s, could more than double its Nvidia chip count by December. He has said the company will use Nvidia hardware exclusively in its data centres.

Why it matters

  • AI is now financed with debt. Bloomberg described the deal as potentially one of the biggest debt financings of the AI boom. Apollo has already arranged a $7 billion financing for xAI to access Nvidia chips, and in August Nvidia teamed up with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR on financing platforms meant to mobilise more than $500 billion for AI infrastructure.

  • A circular flow of money. Nvidia sells the chips, partners with the lenders who finance their purchase, and is itself a major SpaceX shareholder. It disclosed in an August filing with the US Securities and Exchange Commission that it held 122.8 million SpaceX shares, worth about $21 billion at the end of June, received through a $10 billion investment in xAI. Critics of the AI boom see in such loops a sign that demand is partly financed by the suppliers themselves.

  • At the worst moment for borrowers? The deal comes as US 10-year Treasury yields hover around 5.3%, near their highest since 2002. Bridgewater founder Ray Dalio has called AI a "classic bubble" and warned that rising interest rates could help bring it to a breaking point, Bloomberg reported.