After $86 billion IPO, SpaceX to borrow $20 billion
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SpaceX still needs money?
Driving the news: After just recently securing $86 billion in a record IPO, Elon Musk's SpaceX plans to raise at least $20 billion more by selling bonds.
Why it matters: SpaceX's public offering earlier this month spotlighted the importance of the stock market to the AI boom. But giant tech companies are also leaning heavily on the corporate bond market to source cash for AI investment.
- Last week, JPMorgan corporate bond analysts noted that data center–related debt was "the single largest driver of near-record debt issuance to start the year."
- "We are not yet at the midpoint of the year and the hyperscalers, data centers and semiconductor financings total $165 billion or already $27 billion more than what was done in the full-year 2025," they wrote.
Between the lines: The proceeds from the bond offering will mostly be used to refinance a $20 billion bridge loan SpaceX took in March as it prepared to go public. Such loans basically ensure that companies planning to go public have the money they would need to wait out an unfavorable turn in market conditions.
- While it's not unusual for companies to refinance their bridge loans in the bond market after going public, the size of SpaceX deal is a reminder of the scale of the current AI infrastructure boom.
Zoom out: Still, it is hard to imagine that SpaceX needs more money.
- SpaceX told prospective buyers of the bonds that it had some $100.8 billion in cash and cash-equivalent securities in the bank on June 19.
- That's more than Microsoft —Microsoft! — had in the bank at the end of its last year.
Yes, but: The AI boom is creating a lot of numbers that are hard to get one's head around.
- The creation of the world's first trillionaire is one.
- SpaceX's cash burn is another.
Stunning stat: After taking account of capex investments, SpaceX spent $14.12 billion more than it brought in last year.
- That's more than double the company's negative free cash flow of $5.39 billion for the previous year.
- This year, SpaceX could generate negative free cash flow of $28 billion, estimates Michael Leshock of KeyBanc Capital Markets.
What they're saying: Investors should probably get used to red ink.
- "Investments, especially in the AI business, should result in billions of dollars in free cash flow deficits for the next few years," wrote analysts for S&P Global Ratings, which along with Moody's and Fitch, gave investment-grade ratings to SpaceX.
- "The rating is constrained by elevated execution and financial risks associated with the company's large-scale AI infrastructure buildout, which is characterized by high capital intensity, sustained negative free cash flow, and a wide range of potential monetization outcomes," Moody's said.
The latest: Investors have been tempering their enthusiasm for SpaceX shares, which tumbled over 16% on Monday, vaporizing roughly $400 billion in SpaceX's market capitalization.
- The slump came even as SpaceX announced a deal to provide computing power to an AI startup called Reflection that could generate $6.3 billion in sales.
- The stock has now declined more than 20% in the last three trading sessions.
Friction point: Nobody knows how these big AI investments will turn out.
- And while they wait to find out, investors could see holdings diluted and made riskier by additional borrowing, bond sales, share sales and lockup expiration.
Bottom line: With AI profitability still a distant goal, shareholders are increasingly reliant on rising stock prices to justify these investments.
- For the capital to keep flowing to the AI buildout, those prices really need to keep going up.
