By Nora Redmond and Britney Nguyen

A report says SpaceX is considering raising $40 billion to finance the purchase of advanced graphic processing units and related systems

SpaceX's stock is falling on Wednesday.

SpaceX is reportedly in discussions to borrow $40 billion to purchase advanced chips from Nvidia as it aims to become a major artificial-intelligence player and cloud provider.

Elon Musk's space-exploration company (SPCX) aims to raise approximately $10 billion in bank loans and an additional $30 billion in investment-grade debt to pay for the chips, the Financial Times reported, citing people familiar with the matter.

While SpaceX is commonly thought of as a rocket-launch company, it's increasingly betting on AI and even renting out data-center capacity to other companies. With those big plans in the works, the company needs a lot of advanced Nvidia chips, and Wall Street expects a lot of financing.

The $40 billion basically equals all of SpaceX's projected $44.5 billion in revenue for this year, according to FactSet.

Still, that is just "a small fraction" of what the company will need for its ambitions, said Richard Windsor, founder of research firm Radio Free Mobile.

While SpaceX was previously targeting 5 gigawatts of computing capacity by the end of 2027, Musk recently said he expects that to be closer to 10 gigawatts, made up of Nvidia's (NVDA) most advanced graphics processing units. Windsor took that commentary to mean at least 7.5 gigawatts. If SpaceX meets its target of two gigawatts by the end of this year, that would leave about 5.5 gigawatts of computing power next year, Windsor said in a note to clients.

To build one gigawatt of computing power with Nvidia's upcoming Rubin AI chip platform, Windsor estimated that SpaceX would have to spend about $61 billion. If the company uses Nvidia's current Blackwell system, that would amount to about $50 billion, he added. Therefore, SpaceX could spend up to $336 billion just on its data-center ambitions in 2027, he said. Of that, Nvidia's systems, which include chips, networking and software, would make up about 68% to 85% of the bill, which could mean SpaceX spends up to a staggering $286 billion with the chip maker next year.

On top of that, Nvidia's chips are effectively sold out a year in advance, Windsor noted, meaning SpaceX has likely made more commitments with Nvidia to meet its 2027 goal, and "many more and much larger raises" are coming.

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The New York-based Apollo Global Management (APO) is anticipated to lead the $40 billion deal, which is expected to close in 2027, the Financial Times reported. Bond-fund giant Pimco is reportedly one of the firms in talks to fund the deal.

Shares in SpaceX were down 2.7% in Wednesday afternoon trading, while Nvidia's stock was down almost 1%.

SpaceX, Nvidia, Pimco and Apollo did not immediately respond to MarketWatch's requests for comment.

Less than two weeks ago, Musk said his AI startup xAI would aim to more than double the number of Nvidia chips at its Colossus 2 data center by the end of the year.

He wrote in a post on X that the facility has 110,000 Nvidia GB200 chips and 440,000 GB300 chips, referring to Nvidia's latest-generation Blackwell and Blackwell Ultra GPUs. However, he said the company behind the Grok AI chatbot expects to have another 220,000 GB300s operational by the following week and an additional 220,000 units in November. Musk added that another 220,000 may come online in December "if we get lucky."

The return on investing in compute capacity is alluring, Windsor noted.

He calculated that data-center providers that currently have compute power capacity to sell can see between $30 billion and $50 billion per gigawatt per year. If the systems last for five years, annual returns could be up to 80%.

"These are stunning returns, which explains why everyone is rushing to build capacity as quickly as they possibly can or to park existing activities and sell the vacated compute to the highest bidder," Windsor said.

In August, Nvidia said it was partnering with Apollo, BlackRock (BLK), Blackstone (BX), Brookfield, Goldman Sachs (GS) and KKR (KKR) to create a $500 billion funding platform to help develop third-party capital pools at "attractive rates" for customers of the chip-design giant to finance the AI build-out.

-Nora Redmond -Britney Nguyen

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10-07-26 1422ET