Apollo, banks in talks to finance SpaceX's $40 billion Nvidia GPU purchase

Apollo Capital Management and several banks are in discussions with SpaceX to help facilitate the company's purchase of $40 billion worth of Nvidia graphics processing units, according to a person familiar with the talks who asked not to be named to discuss the matter.

The deal will primarily rely on the investment-grade debt market, which SpaceX just tapped four months ago, the person said.

Two weeks after its record-breaking IPO in mid-June, the space exploration company raised $25 billion in bonds at different durations. CNBC was told at the time that SpaceX's bond sale saw incredibly high demand, highlighting strong interest from fixed-income investors.

But since then, artificial intelligence-related bonds have sold off, while credit spreads have widened.

SpaceX's $40 billion debt deal will likely use GPUs as collateral and Apollo Capital is said to be playing a leading role in facilitating the financing, the person said.

Apollo declined to comment. Nvidia did not immediately respond to a request for comment.

The market is still operating under the expectation that GPUs hold their value for about seven years, according to a person in the credit industry who asked not to be named to discuss the matter. Computing power is scarce and the shortage is not expected to abate anytime soon, which supports the value of high-performing GPUs.

The Financial Times was first to report on the financing talks.

While a bond deal of this size is notable, it follows a series of bond issuances from Meta , Amazon and Google as the cost to fund the AI buildout gets more expensive.

Both sources told CNBC that more debt sales are expected, fixed-income investors are demanding a higher yield to service the debt, a sign that participants are becoming more selective about their AI exposure.

SpaceX is already running a massive load of Nvidia AI chips and has plans to add to it.

CEO Elon Musk said in a Sept. 24 post on X that his company's Colossus data center in Memphis, Tenn., was running 230,000 Nvidia AI chips, while Colossus 2 had 550,000. Musk said plans were to more than double the number of chips by late December to reach 1.21 million.

For the SpaceX bulls, the company has inked compute deals with Google , Anthropic , Cursor and Reflection AI, and bringing more capacity online could boost revenue quickly.

On the flipside, the company reported nearly $40 billion in debt in its second-quarter financials, and its existing debt trades near junk bond levels, as credit markets have, overall, been more

However, to make SpaceX's ambitions a reality, it needs to keep spending — and on more than just chips.

—CNBC's Morgan Brennan contributed to this article