Key Takeaways
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The cost of insuring SpaceX’s debt against default rose to 194 basis points on Wednesday from 110 in June, and its 50-year bonds trade near 85 cents on the dollar.
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SpaceX is borrowing to pay for its AI data centers, and the bond market is right to charge more for that risk.
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Capital spending reached $20.9 billion in fiscal 2025, against $6.79 billion of cash from operations, and total debt rose to $24.5 billion.
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The cloud contracts that start ramping in October are the first real test of management’s claim that new data centers pay for themselves in under a year.
Right now, the most important vote on SpaceX (SPCX:NASDAQ) is coming from its bondholders.
The stock slipped this week after Bloomberg Tech host Ed Ludlow reported that SpaceX is in early talks to borrow $40 billion to buy chips from Nvidia (NVDA:NASDAQ). Of that, $10 billion would be loans and $30 billion investment-grade credit.
Credit markets were already marking SpaceX down before that news. On Thursday’s episode of the Prof G Markets podcast, co-host Ed Elson pointed out that SpaceX’s credit default swaps rose to 194 basis points on Wednesday, from 110 in June. In his words, “the cost of insuring SpaceX’s debt against default is suddenly getting very expensive.”
His guest John Foley, head of the Financial Times’ Lex column, added that the 50-year bonds trade “at something like 85 cents on the dollar.” He put the five-year bonds closer to 95. His read:
“At the moment, the market’s not sending out a distress signal, but it is saying this company’s getting riskier by the minute.”
Follow the cash
The worry is easy to see on the cash flow statement. In fiscal 2023, SpaceX’s $4.52 billion of cash from operations just covered its $4.42 billion of capex. By fiscal 2025, capex had reached $20.9 billion, against $6.79 billion from operations. That leaves a gap of about $14.1 billion.
And the gap is getting wider. Elson noted SpaceX “spent more than $18 billion on CapEx last quarter and it’s all going into these data centers.” In one quarter, that’s 86% of what SpaceX spent in all of fiscal 2025.
Borrowing is covering the difference. Total debt rose from $15.4 billion at the end of fiscal 2024 to $24.5 billion a year later.
That figure doesn’t include the debt SpaceX raised right after its IPO. It also leaves out the $40 billion it’s reportedly lining up now, which on its own is more than 1.6x the fiscal 2025 total.
Foley also pointed to the rating. SpaceX has an investment-grade rating, and if it lost it, “the yields would go up a long way and it would become much more risky.”