His mega-financing deals have generated lucrative investment-banking fees while reshaping global market dynamics.
asserted
deals → generate → dynamics
SpaceX’s $US75 billion ($107.8 billion) listing in June soaked up so much liquidity that it may have delayed the initial public offerings of Anthropic PBC and OpenAI.
uncertain
it → soak → PBC
Now, the window for blockbuster IPOs appears to be closing.
asserted
window → appear → IPOs
Banks were stuck for years with $US13 billion of debt used to finance the deal, weighing on their balance sheets and souring the mood for leveraged-finance transactions.
asserted
Banks → stick → transactions
Borrowing costs jumped soon after Musk finalised his financing package, as the Federal Reserve delivered 525 basis points of hikes in just 16 months.
asserted
Reserve → jump → months
Which raises the question: What happens now that SpaceX is embarking on another borrowing spree?
asserted
SpaceX → raise → spree
The company is seeking to raise $US40 billion to fund purchases of Nvidia chips, just months after tapping the US corporate bond market for $US25 billion.
asserted
company → seek → billion
It’s too early, however, to say the AI-fuelled credit cycle is turning.
asserted
cycle → ’ → ?
The bond market still has capacity.
asserted
market → have → capacity
SpaceX’s capital raise comes on the heels of an unusually quiet September, when hyperscalers issued no high-grade dollar debt.
asserted
hyperscalers → come → debt
And technology firms can have more room to grow.
asserted
firms → have → room
Banks still account for 18 per cent of the $US2.3 trillion US corporate bond market, compared with just 10.5 per cent for the tech industry, according to data compiled by Bloomberg.
uncertain
Banks → account → Bloomberg
AI firms are pushing through deals even as borrowing costs rise and investors get cautious.
asserted
investors → push → deals
As the Treasury yield curve steepens, tech giants are shortening the maturities of their bond offerings.
asserted
giants → steepen → offerings
In August, Alphabet Inc sold eight notes totaling $US8 billion, all due within five years, a marked shift from six months earlier, when the search giant concentrated its issuance at the longer end.
asserted
giant → sell → end
According to Goldman Sachs Group Inc, the share of hyperscaler bonds sold at shorter maturities has risen to 46 per cent since midyear, from 30 per cent in the first half.
uncertain
share → accord → half
The companies are also venturing beyond the dollar, by selling securities in Japanese yen and Australian dollars, in search of a broader pool of investors.
asserted
companies → venture → investors
Amazon.com Inc, for instance, raised $US5.7 billion from its first-ever pound bond sale last month, following in the footsteps of Alphabet.
asserted
Inc → raise → Alphabet
Meanwhile, smaller and riskier companies are sweetening their financing structures to lure investors.
asserted
companies → sweeten → investors
For instance, Volta Infrastructure Holdings, an AI cloud services provider, is offering a $US5 billion leveraged loan yielding about 11 per cent.
asserted
Holdings → offer → cent
That’s one of the highest rates in the market.
asserted
That → ’ → market
More unusually, the loan fully amortises, which means the principal is paid down over its life rather than coming due in a lump sum at maturity, as is typical with corporate debt.
asserted
principal → amortise → debt
In other words, rising global bond yields have not dampened AI companies’ risk appetite.
asserted
yields → rise → appetite
Their bankers will tailor coupon payments and deal structure to keep investors on board.
asserted
bankers → tailor → board
The AI race, after all, has expanded from the technological frontier to the battle for capital, where the ability to raise money and scale quickly may ultimately determine the winners.
uncertain
ability → expand → winners
China has accelerated its fundraising in recent months.
asserted
China → accelerate → months
Why should American companies hit the pause button now?
asserted
companies → hit → button
To be sure, given the size of the offering, SpaceX’s underwriters will need to structure the deal carefully if they want to keep the AI debt boom going.
asserted
boom → give → deal
Offering a wide range of maturities would help the market absorb such a large offering.
asserted
market → offer → offering
Pricing will matter, too: Cut premiums too aggressively and orders can evaporate overnight, wreaking havoc, as Paramount Skydance’s $US52 billion transaction demonstrated.
asserted
transaction → matter → havoc
But for now, the AI party rolls on.
asserted
party → roll → ?
Musk may be testing the limits of the debt boom, but he’s unlikely to break it.
uncertain
he → test → it
The Aporia
