SpaceX Eyes Borrowing for Nvidia Chips, Apple Plans Smart Home Push

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Bloomberg Audio Studios, Podcasts, Radio, News. Bloomberg Tech is live from the heart of Silicon Valley, with Ed Ludlow in San Francisco.

Ed Ludlow (0:22)

This is Bloomberg Tech. Coming up, the AI buildout keeps driving record borrowing, with SpaceX in talks to borrow $40 billion to buy chips from Nvidia. Plus, Apple plans its entry into the smart home space with a doorbell, firmastat and other accessories developed with LG.

And we'll discuss the mega AI IPO pipeline with JD Moriarty, Vice Chair and Head of Global Tech Equity Capital Markets at Bank of America Securities. Hello, from the world of tech. So, stocks close at records Tuesday, including the NASDAQ 100 rate tech heavy index. We're now hitting pause on that, largely because of concerns about inflation. Oil is pushing higher. Inflation is still the concern of the day. But there's a lot in the news cycle. So, let's get to our top story and take a look at today's big number. $40 billion.

Bloomberg's reporting that SpaceX is in talks with banks and investors to borrow $40 billion to buy chips from Nvidia, all according to sources. I want to get the details with Bloomberg's Chief Wall Street correspondent, Adhira Rajan. Let's start with the structure, right? There is a split between loan and some debt and the players involved based on Bloomberg's reporting.

Sridhar Natarajan (1:31)

Look, every other morning, we seem to be waking up to these big unfathomable numbers almost. It's $60 billion one week, $40 billion next week. It's in tens of billions of dollars. This latest one involves SpaceX trying to finance these Nvidia chips with a $40 billion package, $10 billion of it to be syndicated through banks. $30 billion of it will likely go through private market players, led by Apollo, PIMCO is possibly involved. They will syndicate it to the rest. But it is very clear that the tech story today is the debt story. There is going to be this increasing confluence between some of the biggest private market players, some of the biggest firms with the deepest balance sheets, and the tech companies that so desperately need to invest and borrow so many hundreds of billions of dollars to fund and finance this AI infrastructure build out.

Ed Ludlow (2:22)

Sri, this morning, Bloomberg's Danny Berger had the opportunity to speak to John Cortese, who's the co-head of corporate credit at Apollo, one of the parties named in our reporting, and she asked about this scoop.

John Cortese (2:34)

Can't talk about SpaceX, but I think if you look at all of these companies that are the best companies in the world, the largest companies in the world, the largest parts of equity portfolios, it's not surprising that the largest companies are looking at this marketplace and saying we'd like to find structured solutions for complicated build outs or project build outs, AI being one of them, chip financing being one of them, so it's a huge amount of that happening. I would expect more of it.

It's been very clearly stated to the marketplace what the CapEx needs are to build that AI. So I think you're gonna see more and more.

Ed Ludlow (3:08)

We also got a warning signal through the CDS, right? Five-year credit default swaps jumping to their highest level since they started trading in June. But listening to that Apollo non-response and the parties on the Wall Street side we're talking about, there's an appetite to back these kinds of deals, right? There's no real concern that the capital can't be found.

Sridhar Natarajan (3:29)

The numbers show that if you look at the amount raised for data centers, for stacking these data centers with chips, for the power required to power these data centers, we've raised about $360 billion.

So far this year, that's about three times the pace last year. And if you talk to analysts across the street, that number is only going to keep going up in the next year or two. We are talking about trillions of dollars in requirements, and these companies will keep coming back to the market. Yes, like you point out, with what is happening in the broader rate environment, with some of the concerns starting to seep in, if there is too much ebullience and too much enthusiasm out there, you will see some of these risk gauges starting to go up. SpaceX, you can see that in the CDS a couple of weeks ago. We talked about Oracle and we saw the moves in Oracle CDS. But for the large part, these are not crazy blowouts. These are contained moves. And for the biggest, most credit worthy players, there will be demand because when you listen to what else people like the senior executives at Bolo have to say, they're not really trying to make a bet on whether these chips will depreciate in value or hold their value.