🦔SpaceX is in early talks to borrow about $40 billion, mostly through bonds, to buy Nvidia chips for its AI business. The cost to insure SpaceX's debt against default jumped Wednesday to the highest level since that insurance started trading in June. My Take The rating agencies call SpaceX investment grade, which puts its bonds in the safe bucket that pension funds and bond index funds buy. Bond traders disagree. The extra yield on its 30-year bond over Treasuries has climbed to 2.38 percentage points, up from 1.75 when it sold in June, and an S&P analyst said the market prices SpaceX closer to junk than to its actual rating. SpaceX lost $4.28 billion in the first quarter on $4.69 billion of revenue, and much of that came from the xAI business it folded in this year. Rockets and Starlink bring in the revenue. The AI side burns the cash, and the plan now is to borrow another $40 billion at rising rates to grow the business that loses money. If the agencies ever cut SpaceX to junk, lots of funds that can only own investment-grade bonds would have to sell at the same time, and anyone in a bond index fund would feel it. I don't see that happening this year, however, I do think there's a decent chance of a downgrade warning before this $40 billion closes. Hedgie🤗