Musk's US$40b borrowing spree tests the debt boom he helped create

Elon Musk has a habit of making Wall Street's balance sheets sweat. The last time he went shopping with borrowed money, banks spent years nursing US$13 billion of Twitter debt that turned toxic almost the moment the Fed began hiking. Now the world's richest person is back at the trough, and the question for anyone tracking capital flows is whether the market has the stomach for another round.

SpaceX is seeking to raise US$40 billion, with the proceeds earmarked for purchases of Nvidia chips. The move comes just months after the rocket and satellite company tapped the US corporate bond market for US$25 billion, and follows its US$75 billion listing in June, a float so large it drained liquidity from the market and appears to have delayed the initial public offerings of Anthropic and OpenAI. For a company that has spent two decades disrupting launch economics, the financial engineering is now nearly as consequential as the rockets.

That June listing is the detail outsiders should linger on. SpaceX is not a legacy aerospace contractor; it is the anchor of Musk's industrial empire and, increasingly, a capital-markets event in its own right. When it raises, the ripples reach beyond Texas and California. Bankers who arrange the deals earn fees, investors who buy the paper set benchmarks, and rival issuers wait their turn. The 2022 Twitter financing showed the downside: banks were left holding debt they could not syndicate as borrowing costs spiked, with the Federal Reserve delivering 525 basis points of hikes in just 16 months. The mood for leveraged finance soured, and Musk's name became shorthand for deal risk.

This time the backdrop is different, but not comfortable. The bond market still has capacity — SpaceX's raise lands after an unusually quiet September in which hyperscalers issued no high-grade dollar debt — and technology firms remain underweight relative to banks, which account for 18 per cent of the US$2.3 trillion US corporate bond market against just 10.5 per cent for tech. Yet the signals are shifting. As the Treasury yield curve steepens, AI firms are shortening maturities: Alphabet sold eight notes totalling US$8 billion in August, all due within five years, a reversal from six months earlier. Goldman Sachs data shows the share of hyperscaler bonds sold at shorter maturities has climbed to 46 per cent since midyear from 30 per cent in the first half. Issuers are also chasing new pools of money, with Amazon raising US$5.7 billion from its first-ever pound bond sale after Alphabet blazed the trail.

For Oceania's wealthy and the advisers who move their money, the read is straightforward. Australian and Japanese dollar-denominated issuance is no longer a novelty but a funding channel, and the region's superannuation pools are natural buyers of the shorter, higher-quality paper that AI giants are now favouring. The riskier end of the market is where the real temperature check sits. Volta Infrastructure Holdings, an AI cloud provider, is offering a US$5 billion leveraged loan yielding about 11 per cent — among the highest rates available — and unusually, the loan fully amortises, paying down principal over its life rather than in a lump sum at maturity. That structure exists to reassure investors who remember what happens when the music stops.

Musk is unlikely to break the AI debt boom on his own. But he is testing its limits, and how underwriters structure the SpaceX raise — the spread of maturities, the pricing premium, the reception from order books — will tell the market whether the cycle has room to run or is quietly closing. Watch the deal, not the rocket.