Elon Musk's SpaceX sells $25 bn in bond to ease X and xAI debt burden

SpaceX sold $25 billion of investment-grade bonds on Tuesday to cut the interest burden that had helped finance Elon Musk's 2022 acquisition of X (then known as Twitter), along with the expensive loans and bonds issued by artificial intelligence (AI) lab xAI last year. Had these businesses remained separate, they would have paid an estimated $1.8 billion this year to service a combined debt burden of $17.5 billion. Following their integration into SpaceX, the company is expected to incur around $1.5 billion in annual interest payments on its first-ever $25 billion bond offering.

Prior to SpaceX's landmark $75 billion IPO earlier this month, Elon Musk consolidated several of his ventures into a single conglomerate, a move that drew strong investor enthusiasm despite the group not yet being profitable. Musk has effectively used revenue after selling Starlink's satellite internet service and SpaceX's rocket contracts with the US government to assist large spending at xAI, which holds X. "To invest in this, you've essentially got to be a believer," said Art Hogan, chief market strategist at B. Riley Wealth. "You have to believe revenues are going to ramp significantly over the coming years."

Investors have shown confidence in the demand for SpaceX's debt offering, which received up to $89 billion in orders. The strong appetite prompted the firm to secure lower borrowing costs during the sale process. The demand persisted even as SpaceX shares experienced volatility, losing roughly 25 per cent of their value over three trading sessions before recovering slightly on Tuesday. However, a SpaceX spokesperson didn't quickly respond to the ongoing development.

Competition with AI firms

Securing accessibility of the investment-grade bond market was a significant move in funding xAI's efforts to compete with the AI firms such as Anthropic PBC and OpenAI. Previously, the company's higher-risk credit profile limited it to sell leveraged loans and high-yield or junk bonds, where debt is pricey. However, after SpaceX acquired xAI in February, winning investment-grade ratings from top credit graders, the company has unlocked access to the cheaper US high-grade bond market, providing SpaceX access to deeper pockets.

"They are going to need more debt to fund their expansion," said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. "If you're going to have a balance sheet with $80 to $100 billion plus of debt, you can't finance that in the junk market."

The global push to build data centres and supporting infrastructure for the artificial intelligence boom is projected to require trillions of dollars in investment. To fund their AI expansion plans, highly profitable companies such as Nvidia and Amazon.com have increasingly tapped the corporate bond market, a trend expected to accelerate in the years ahead.

In recent weeks, SpaceX, through xAI, has secured several multi-billion-dollar computing agreements with Anthropic, Google and AI startup Reflection, strengthening its AI-related revenue stream. However, according to public filings, xAI reported revenue of $3.2 billion last year while posting an operating loss of $6.4 billion. The company's annual losses have grown sharply from approximately $1.6 billion recorded in 2024.