Musk's SpaceX adds billions in debt while cutting interest costs

Elon Musk is no stranger to financial alchemy. His latest feat: adding billions of dollars of debt onto his cash-burning business empire while simultaneously cutting its annual interest burden.

SpaceX sold $25 billion of investment-grade bonds on Tuesday, marking the final step to replace the costly debt that had helped finance Musk's 2022 acquisition of X, then known as Twitter, as well as the expensive loans and bonds issued by artificial intelligence lab xAI last year to bridge its rapid cash drain.

Those entities would have spent roughly $1.8 billion to service a combined $17.5 billion of debt this year if they hadn't been folded into SpaceX. The business is now set to pay $1.5 billion of interest annually on its $25 billion inaugural bond sale.

Ahead of SpaceX's historic $75 billion initial public offering earlier this month, Musk fused many of his disparate companies into a conglomerate that investors gushed over, even though it doesn't yet make a profit.

The trillionaire has effectively used revenue from Starlink's sales of satellite internet service and SpaceX's rocket contracts with the U.S. government to support heavy spending at xAI, which holds X, the renamed social media app.

"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."

Demand for SpaceX debt suggests that many investors have faith. The offering received $89 billion of orders at its peak, a level of market desire that allowed the company to lock in lower interest costs during the course of the marketing process.

Bond buyers were eager to participate even as SpaceX shares have wobbled in the stock market, losing about a quarter of their value across three sessions before making a slight recovery on Tuesday.

A representative for SpaceX didn't immediately respond to a request for comment.

So far, investors have jumped at the chance to get a piece of Musk's sprawling company, but SpaceX must now prove that it can balance such different business models and eventually turn its AI business into a boon rather than an albatross.

AI debt frenzy

Gaining access to the investment-grade bond market was key to supporting xAI's ambitions to compete with the likes of Anthropic PBC and OpenAI.

Before, its risky credit profile only allowed it to sell leveraged loans and junk bonds, where debt is pricey. But once SpaceX acquired xAI in February, and then won investment-grade ratings from top credit graders, it unlocked access to the cheaper U.S. high-grade bond market.

That also gave SpaceX access to deeper pockets. The U.S. investment-grade bond market is roughly $8 trillion in size, versus the $3 trillion of the combined junk bond and leveraged loan markets.

"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 race to build out data centers and related infrastructure to support the AI boom is expected to cost trillions and highly profitable companies such as Nvidia Corp. and Amazon.com Inc. have been borrowing from this market on their corporate balance sheets to finance AI ambitions. Issuance is expected to ramp up in the coming years.

In recent weeks, SpaceX through xAI has secured several billion-dollar compute deals with Anthropic, Google and AI startup Reflection, which will boost the company's total revenue tied to AI.

But xAI generated just $3.2 billion in sales last year while showing a loss from operations of $6.4 billion, according to public filings. Those annual losses have ballooned from around $1.6 billion in 2024.

Tuesday's bond offering largely hinged on the strength of SpaceX's other business lines.

"The credit case is Starlink's growth and the AI segment reaching some sort of self-sufficiency path before you run out of equity," said Ross Pamphilon, chief investment officer of fixed income at Impax Asset Management, who expressed an interest in buying the SpaceX bonds. xAI, he said, is "a deeply cashflow negative entity, but you've got to look at what it's being bolted onto - a successful strong connectivity franchise in Starlink."

A long road

The $25 billion bond offering was sold in multiple tranches with coupons ranging from 5.35% to 6.65% depending on the maturity. That leads to annualized borrowing costs of around $1.5 billion.

For comparison, the $17.5 billion of junk bonds and leveraged bonds that had been on X and xAI's balance sheets - which had interest rates roughly between 9.5% to 12.5% - would have cost around $1.8 billion to service on an annual basis if the debt had still been outstanding as of earlier this year.

It took a long and winding road to get here.

Musk shocked markets by announcing a $44 billion take-private of Twitter in April of 2022 - the height of a frenzy around leveraged buyouts of technology companies. But the Federal Reserve's rate-hiking cycle tanked valuations, meaning Musk had significantly overpaid for the business. He tried to get out of the purchase but a Delaware judge forced him to close on his acquisition in October of that year.

A group of banks led by Morgan Stanley had underwritten about $13 billion of debt to help finance the transaction, with plans to sell it to institutional investors in the form of junk bonds and leveraged loans. They didn't succeed due to market turbulence and elevated interest rates, and instead had to use their own balance sheets to fund the commitments, one of the biggest black eyes in Wall Street debt markets of recent memory.

The banks clipped their coupons and collected interest, which eased some of their pain. Ultimately they were able to offload the debt onto investors in early 2025 - thanks in large part to X's surprise investment in xAI, which boosted the value of the debt.

Then xAI acquired X in March of 2025, and in June of that year borrowed an additional $5 billion. When SpaceX subsequently purchased xAI in February, Morgan Stanley - which handled both companies' debt raises - told existing lenders that the debt pile was set to be paid back in full, without saying how.

That cash ultimately came from a $20 billion bridge facility that SpaceX raised from a group of banks. The short-term loan was meant to only be outstanding for up to about two years and had an effective interest rate of 4.58% as of March 31, according to regulatory documents.

SpaceX's Tuesday bond deal refinanced the bridge and can also be used for general corporate purposes.

"It's hard to even model where SpaceX is even going in the next few years," Schiffman said. "Their mission is lofty."

(With assistance from Brian Smith.)

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This story was originally published June 23, 2026 at 9:44 PM.