SpaceX borrows for AI chips as Ackman warns on debt load

What did SpaceX announce?

SpaceX announced it was raising $40 billion in debt. The money will fund its computing buildout and buy graphics processing units, the chips that run AI models.

Why it matters: Its shares rose 1.2% on Monday to close at $136.37. That added $22 billion to its market value. In after-hours trading the stock rose another 0.6%.

What did Bill Ackman say about AI borrowing?

The Pershing Square Capital founder spoke at an event in Mexico City on Saturday. Asked whether AI spending and debt are sustainable, he said yes. He argued that the return on computing is well above the cost of capital, or what it costs to raise money.

He said the giant cloud companies, known as hyperscalers, have the credit to raise money. He was less confident about pure-play neocloud firms, which rent out AI computing power. "I think they're much more at risk," he said.

Ackman also said SpaceX might have to borrow far more if Elon Musk meets the AI computing goals he shared on the company's third-quarter earnings call. He said companies are now competing with entire countries for debt.

Why did CoreWeave shares fall?

CoreWeave (Nasdaq: CRWV), a prominent neocloud, tumbled 8.6% on Monday to close at $50.15. The company lost $2.6 billion in market value. The stock now sits 63.7% below its 52-week high of $137.98.

The drop came on a weak day for technology broadly. The technology sector fund (XLK) slid 2.9% and the Nasdaq-100 fell 1.4%. Musk had also recently warned that neoclouds may struggle to get debt, which could lead to failures or consolidation in the group.

What could change borrowing costs next?

The open question is whether borrowing stays affordable for companies without a hyperscaler's balance sheet. Ackman said big spenders would keep investing even at higher rates. He did not say the same for neoclouds.

The 10-year Treasury yield, a benchmark for long-term borrowing costs, ended Monday at 4.91%. The October jobs report on Nov. 6 and the October consumer price index on Nov. 10 could shift expectations for the Fed's rate path.