SpaceX default insurance hits record high

The cost of insuring SpaceX’s debt against default surged to a record level on Thursday, as its five-year credit default swap spread widened by 14.6 basis points to 284.3 basis points per year. At that level, protecting $10 million of SpaceX debt would cost about $284,300 annually, signaling heightened investor concern about the company’s credit risk. The jump came during a broad technology and AI-related credit slump after US elections, in which Democratic victories prompted fears of tighter regulation on artificial intelligence infrastructure.

SpaceX and AI-cloud computing company CoreWeave (CRWV) were among the biggest casualties in the credit market, with SpaceX’s default protection costs reaching their highest ever while yields on one of CoreWeave (CRWV)’s bonds climbed above 17%. Shares of SpaceX and Tesla (TSLA) fell sharply, and the two companies’ combined market value declined by $130 billion on Wednesday. The move in SpaceX’s credit insurance contrasts with declining default protection costs for some major AI hyperscalers over the same period.

The record widening in SpaceX’s CDS followed a landslide Democratic victory in the US midterm elections and Democrats winning control of Congress. Market participants have warned that the political shift could intensify regulatory scrutiny of Elon Musk’s businesses and complicate an anticipated merger between SpaceX and Tesla (TSLA). Concerns about potential restrictions on AI infrastructure development added to selling pressure in both companies’ stocks and credit.

In Texas, Governor-elect Gina Hinojosa has pledged to freeze new data-center approvals and maintain existing limits until stronger rules are in place to protect electricity customers and water supplies. SpaceX has explored several potential data-center and facility sites in the state, so tighter rules could affect its AI growth plans there. These developments have reinforced investor focus on how policy changes could influence SpaceX’s capital spending and financing needs for AI-related projects.

The rise in default insurance costs comes as SpaceX prepares a large AI investment financed through a roughly $40 billion agreement with Apollo Global Management to fund AI chips and related equipment. Under the structure, an Apollo-managed entity will purchase the equipment and lease it to SpaceX for about five years, allowing the company to secure advanced Nvidia (NVDA) chips without paying the entire purchase price upfront. Banks have begun approaching investors about taking portions of this financing package, with some prospective buyers reportedly offered stakes of up to $500 million.

Despite higher perceived risk in credit markets, SpaceX retains sizable financial resources. At the end of September, the company held about $89.9 billion in cash and short-term securities against approximately $38 billion in outstanding debt. Fitch has stated that the $40 billion GPU lease commitment leaves SpaceX’s BBB+ investment-grade rating unchanged, underscoring that, while insurance costs imply greater caution, rating agencies still view the company as investment grade.

Less than two weeks before the latest market moves, Elon Musk said that debt markets had almost entirely shut off access to funding for companies without substantial revenue outside AI data centers, predicting consolidation among more than 200 specialist cloud providers. He argued that SpaceX was different because of its investment-grade status and revenue from Starlink and rocket launches, even as the company pursued large-scale AI infrastructure spending. The new highs in SpaceX’s default insurance now reflect investors reassessing that distinction.

At the same time, the Democratic sweep has raised fresh questions over a possible SpaceX-Tesla combination. Analysts have warned that increased regulatory scrutiny could make any merger more difficult, adding another layer of uncertainty for investors. Musk responded to the shifting policy environment with a remark that data centers in space were looking appealing, highlighting the growing tension between SpaceX’s AI ambitions and evolving political and regulatory risks.