{"id":2661,"date":"2026-06-21T06:06:49","date_gmt":"2026-06-21T06:06:49","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=2661"},"modified":"2026-06-21T06:06:49","modified_gmt":"2026-06-21T06:06:49","slug":"spacexs-epic-fundraising-campaign-for-ai-has-only-just-begun","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=2661","title":{"rendered":"SpaceX\u2019s epic fundraising campaign for AI has only just begun"},"content":{"rendered":"
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By Bailey Lipschultz and Davide Barbuscia, Bloomberg<\/strong><\/p>\n

When Elon Musk went into sales pitch mode ahead of the SpaceX IPO, the comparison he marshaled to justify valuing the company in the trillions of dollars, and tapping investors for tens of billions, raised a few eyebrows.<\/p>\n

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\u201cWe\u2019re kind of like the Union Pacific,\u201d he said in an interview in an investor presentation ahead of the initial public offering, citing one of his frequent touchstones \u2014 a historic infrastructure project in the 1800s intended to connect western states by rail for the first time. \u201cPeople thought they were crazy\u201d when they built it, he said, \u201cbut now California is the biggest state in the country.\u201d<\/p>\n

The pitch from one of the world\u2019s most successful and divisive entrepreneurs was typical Musk. The world\u2019s richest person and first trillionaire linked SpaceX, with its plans for orbital data centers and a colony on Mars, to a name evoking an essential part of America\u2019s growth into a superpower \u2013 a prize easily justifying the investment that lifted the company\u2019s market value above $2.5 trillion in a handful of trading days.<\/p>\n

The IPO wasn\u2019t the end of the fundraising campaign, it was the start. SpaceX is already turning to the bond market and is preparing to seek at least $20 billion in its first deal, Bloomberg News reported. Capital expenditure could surpass $700 billion a year by 2031 in one estimate. Is that too much to ask when the goal is, as Musk put it, making \u201cStar Trek real\u201d?<\/p>\n

Ask the backers of the Union Pacific. Construction of the railroad flamed out and stopped in Utah \u2014 not California. That project was propped up by government support as it minted generational wealth for insiders before ultimately failing.<\/p>\n

Richard White, American history professor emeritus at Stanford University, called the original Union Pacific \u201ca mess of self-dealing and corruption.\u201d<\/p>\n

\u201cTo use that as your model of what your corporation is going to be, plays on the immense ignorance of the history of this country, of financial markets and most Americans,\u201d he said in an interview.<\/p>\n

\n<\/div>\n

A representative for SpaceX didn\u2019t immediately respond to a request for comment.<\/p>\n

Tall Order<\/p>\n

It\u2019s a tall order to build out SpaceX\u2019s artificial intelligence ambitions, particularly as the company isn\u2019t profitable.<\/p>\n

Research analysts at Goldman Sachs Group Inc. and Evercore ISI are modeling for the company to spend more than $1 trillion by the end of the decade, Bloomberg News has reported. The bulk of that spending will focus on SpaceX\u2019s AI operations and center on the vision of getting data centers into space.<\/p>\n

\n<\/div>\n

In meetings with prospective investors, the company\u2019s finance chief Bret Johnsen and President Gwynne Shotwell said they expect the IPO was the last time SpaceX would sell stock, according to people familiar with the matter. Instead of raising billions by diluting shareholders \u2014 as well as Musk himself \u2014 the plan is to tap debt markets after it touted investment-grade ratings throughout the IPO process, some of the people said, asking not to be identified as the information isn\u2019t public.<\/p>\n

Late on Thursday, the three major ratings firms gave the company investment-grade bond scores.<\/p>\n

Oppenheimer & Co. analysts led by Timothy Horan are modeling for the company to tack on more than $400 billion in net debt by 2031, up from about $13 billion as of a few months ago. That\u2019s vastly more than almost every US company currently has on its books and would more than triple what Oracle Corp. has.<\/p>\n

The analysts expect debt to be the primary source of funding for the company supplemented by roughly $40 billion of additional equity, they wrote in a June 18 note.<\/p>\n

But debt market participants have their doubts.<\/p>\n

\u201cThe vast majority of the capex is going to have to be financed with equity capital rather than in our market,\u201d said Jim Fitzpatrick, head of US investment grade research at Allspring. \u201cThey just aren\u2019t going to have the capacity for issuing a lot of additional debt while keeping investment grade ratings, especially since this company has no track record with the rating agencies.\u201d<\/p>\n

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SpaceX is set to tap investors for cash potentially just as Anthropic PBC and OpenAI seek to raise tens of billions of dollars in IPOs of their own as soon as this year. Meanwhile, AI-focused members of the Magnificent Seven companies including Alphabet Inc. are pooling further billions.<\/p>\n

\u201cIt\u2019s a simultaneous buildout of data centers and semiconductors, energy infrastructure and satellite networks,\u201d said Justin Reed, chief investment officer at Brown Brothers Harriman. \u201cWe\u2019re moving from this world of funding applications which was capital light and now, frankly, we\u2019re funding an entire economic ecosystem, and to us that\u2019s why the capital requirements look so extraordinary.\u201d<\/p>\n

By McKinsey & Co.\u2019s count, the cost to build out data centers here on Earth will require $7 trillion by the end of the decade. SpaceX\u2019s orbital ambitions would likely add to that figure, potentially testing both the equity and debt markets. Some estimate that with SpaceX\u2019s lofty multiple, equity would be easier.<\/p>\n

\u201cWith SpaceX, if you\u2019re going to buy into the hype of the momentum regardless of valuation, at least if you\u2019re buying the equity, there\u2019s material upside,\u201d said Joe Hegener, chief investment officer, Asterozoa Capital. \u201cBut in debt markets, your upside is capped at the coupon and your downside is everything.\u201d<\/p>\n

Bankers are optimistic that the market can continue to fund plenty of spending \u2014 particularly as it relates to building out data centers and so-called hyperscalers providing the computing power behind AI\u2019s rapid growth.<\/p>\n

\u201cAll of this is changing the capital markets in a pretty meaningful way,\u201d said Lisa Clyde, co-head of global capital markets at Bank of America Corp. \u201cWe are seeing the lines blur between products and between public and private markets, and companies are having to think more creatively about on- and off-balance sheet financing.\u201d<\/p>\n

The pickup in financing has led to a jump in activity across products. US IPOs and share selldowns have seen $163 billion so far this year \u2014 even when removing SpaceX\u2019s IPO \u2014 which is up 28% from last year, data compiled by Bloomberg show. Debt issuance tied to AI has topped $300 billion since November across multiple credit markets, driving near-record issuance this year, according to strategists at JPMorgan.<\/p>\n

Monumental Spending<\/p>\n

To Jim Chanos, the veteran short-seller and president and founder of Chanos & Co., SpaceX along with the Magnificent Seven and Anthropic and OpenAI promise a monumental amount of spending that the market won\u2019t see a return on \u2014 or even feel confident in the prospect of one \u2014 for years.<\/p>\n

\u201cIt\u2019s five to ten years away or longer, so we\u2019ll have this massive, massive capital spend without a lot of stuff to show for it with the exception of the people selling these picks and shovels,\u201d he said in an interview, referring to suppliers that can profit from a gold rush without actually mining themselves.<\/p>\n

\u201cPeople are counting on really transformative changes not only in the way we live our lives but also hyper productivity growth and GDP growth, I\u2019m just not so sure,\u201d he said.<\/p>\n

The realities of Musk\u2019s financing plans are difficult to grasp, with historical comparisons still falling short compared to what SpaceX wants to do. But even though no one is seizing on the analogy to suggest he or SpaceX are doing anything wrong or illegal, Musk\u2019s own comparison to Union Pacific feels on the nose to some skeptics.<\/p>\n

Some associate Union Pacific with the so-called Credit Mobilier scandal. According to Stanford\u2019s White, although Union Pacific had a huge amount of capital, much of it was siphoned off to the Credit Mobilier, the construction company working on the project, which was owned by insiders at the time.<\/p>\n

\u201cThe fact that Union Pacific had the biggest fraud of the 19th century attached to it \u2014 the Credit Mobilier \u2014 which was a complete general contracting scam underneath the umbrella of Union Pacific building out the railroad, it\u2019s a little ironic isn\u2019t it?\u201d Chanos said.<\/p>\n

Read more SF Giants plagued by four errors, four hit batters in ugly loss to Marlins<\/a><\/p>\n

\u2013With assistance from Loren Grush.<\/p>\n

More stories like this are available on bloomberg.com<\/p>\n

\u00a92026 Bloomberg L.P.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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