SpaceX Stock Slides as Credit Risk Hits Record on $40B Debt Plan

SpaceX stock pulled back on Oct. 7 as investors reacted to the company’s latest AI financing plans. SPCX closed at $167.60, down 2.51%, after reaching $176.42 during the previous session.

The decline coincided with a sharp increase in SpaceX credit risk. Investors pushed credit-default-swap spreads to their highest level since the contracts began actively trading in June.

SpaceX Stock Falls as Credit Risk Hits Record

Investors are pushing back on Space Exploration Technologies in the bond market. The spread on its five-year credit default swaps jumped to 194 basis points on Wednesday. This simply means that it costs about $19,400 annually to protect $1 million of its debt against default. It has been in a strong upward trend after starting to trade at 110 basis points.

The surge happened after the FT reported that the company was in talks with Apollo Global Management to get $40 billion in financing to buy Nvidia chips. $10 billion of this will be through syndicated loans, with the remainder being in investment-grade bonds.

The company has been on a spending spree in the past few months. It went to market shortly after its IPO and raised about $20 billion in debt, bringing its cash on hand to about $100 billion. The company also acquired Cursor, an AI coding startup, for $60 billion.

In total, its capital expenditure rose to over $18 billion in the second quarter from $10 billion in Q1 and $2.8 billion in the same quarter last year. This spending is mostly in its artificial intelligence business, which is made up of data center and Grok solutions.

In addition to the rising bond yields, the company is also seeing its bond yields jump lately. Yields of those expiring in 2056 jumped to 7.9%, while those with 2046 maturities rose to 7.92%. The spread, which is a measure of the premium that investors demand to hold bonds rather than US government bonds has jumped by 1.76% since June.

SpaceX Believes that Revenue Growth Can Offset These Risks

Elon Musk and the team are betting that the expected revenue growth helps to justify the ongoing spending spree.

Indeed, analysts are optimistic that the company has more room for growth in the foreseeable future. The average estimate among investors is that its annual revenue will jump to over $45 billion this year, followed by $114 billion next year. It has already received some major AI business, including from Google, which is paying it $950 million a month. Anthropic pays it over $1.5 billion a month.

Some analysts are more optimistic. Goldman Sachs believes revenue will scale to $474 billion by 2030, supported by its Starlink and data center businesses. Morgan Stanley, on the other hand, sees the revenue soaring to over $330 billion in 2030. The two companies participated in their IPO in June.

Additionally, SpaceX has a big equity base that help to secure its borrowing. It has a market cap of over $2.27 trillion. This means that it can easily sell shares to raise cash if its debt comes under substantial pressure.

SpaceX Stock Price Technical Analysis

The four-hour chart shows that SPCX stock has performed well over the past few days. It recently made a strong bullish breakout above the key resistance level of $157.9, its highest level on September 21. Moving above that level confirmed a bullish breakout.

The stock has remained above the 50-period moving average, which is a bullish sign. However, it also formed a shooting star candlestick on October 6, which explains the pullback. Therefore, the most likely scenario is where it drops to $160 and then resumes the upward trend.

This article is for informational purposes only and does not constitute financial or investment advice. Credit spreads, bond prices, analyst forecasts and technical levels may change as market conditions evolve.