SpaceX said it has closed a $40 billion financing deal to acquire AI chips for data centers. SpaceX signed a binding commitment letter covering about $40 billion in GPU leases from an entity managed by Apollo Global Management. SpaceX expects to finalize the master finance lease before the end of 2026. The chips will arrive in batches, and the leases will begin in the first half of 2027.
A regulatory filing states that the Apollo-managed entity will purchase the chips and lease the chips to SpaceX. Apollo Global Management provides financing directly to companies rather than through banks. Musk described the financing as debt. However, the filing classifies the arrangement as a finance lease, a long-term rental with loan-like characteristics. SpaceX would repay about $40 billion in principal through quarterly payments over roughly five years. The leases would also carry a fixed interest rate that has not yet been determined.
The financing covers GPUs, graphics processors used to train and operate AI models. SpaceX absorbed xAI in February. Musk said debt markets had almost entirely stopped providing money over the past few weeks to companies without substantial revenue independent of AI data centers. Musk said SpaceX secured the financing because SpaceX has investment-grade credit and revenue from Starlink and rocket launches. Moody's assigned SpaceX an investment-grade Baa1 rating in June. Starlink provides satellite internet, and Starlink and rocket launches generate revenue unrelated to AI.
Musk predicted widespread failures and consolidation among more than 200 neoclouds, with only a small number surviving. Neoclouds specialize in renting GPU capacity to AI developers. CoreWeave, the largest neocloud, started mining Ethereum with graphics cards in 2017 before moving into AI after Ethereum ended mining in 2022. CoreWeave shares declined about 30% between September 30 and October 16, falling from $87 to $61. CoreWeave carries roughly $50 billion in debt. CoreWeave's unsecured bonds, which lack specific assets pledged as collateral, yielded about 15% in mid-October.
Chips depreciate rapidly, while the associated loans remain outstanding for years. CoreWeave recorded nearly $1.4 billion in depreciation and amortization in the second quarter against about $2.6 billion in revenue. Citadel founder Ken Griffin told the firm's markets conference on October 20 that GPUs have near-zero marginal costs once installed, comparable to airline seats. Griffin said prices can therefore fall sharply when supply exceeds demand.
Venture capitalist and entrepreneur Chamath Palihapitiya expects more AI computing capacity to remain idle in 2027 than forecasts anticipate. Palihapitiya said delays in the existing pipeline will surprise market participants in 2027. Palihapitiya predicted that hyperscalers will respond by prioritizing internal computing requirements over third-party demand. Hyperscalers include cloud providers Amazon, Microsoft and Google. Palihapitiya said purchased but underused hardware generates less revenue than the hardware costs to finance. Palihapitiya said the problem affects the industry apart from one exception that Palihapitiya did not identify. Palihapitiya predicted a turbulent 2027 that would eliminate poor investments and bring consolidation for some companies.