AI fears add 200 basis points to SpaceX debt as 8.75% slice priced

SpaceX's first corporate bonds priced at 6.65% just four months ago, a period described as the giddy, futuro-optimist days. The jump to 8.75% on the most expensive slice of its $40 billion private credit borrowing shows how quickly lender sentiment has shifted. At least 25 basis points of that gap trace to the Fed's September rate hike and expectations of another by year-end, leaving roughly 200 basis points tied to growing doubts about the ROI of AI and whether borrowers will be good for the money.

Elon Musk framed the deal as a sign of strength, posting on X that debt markets have almost entirely shut off access for companies without substantial revenue independent of AI data centers, while noting SpaceX is investment grade and has Starlink & launch revenue. Yet the market is pricing a BBB company like it's two rungs lower, suggesting investors are demanding a premium even from an issuer with revenue outside AI. An executive at an AI infrastructure fund described a supply-demand imbalance: AI needs a lot of money, and investors need to catch their breath.

The anxiety appears confined to credit investors for now, a group called more dour and pessimistic than stockholders. But fear is contagious, and if it spreads to stockholders, things could get ugly quickly.