Although SpaceX (SPCX.US) reported third-quarter results that significantly beat Wall Street expectations, sending its stock up more than 12% at one point on Wednesday, its bonds were sold off by investors.
As SpaceX announced it would continue making large-scale investments in artificial intelligence (AI) computing power, satellite broadband, and mobile communications businesses, the bond market began to worry that the company may further expand its borrowing, thereby increasing its financial burden.
On Wednesday, the risk premium on SpaceX bonds rose noticeably, extending the trend of rising credit risk reflected in its credit derivatives market earlier in the week.
During U.S. stock market trading, the credit spread on SpaceX bonds with a 6.6% coupon maturing in 2046 widened by 9 basis points to 264 basis points. This means investors are demanding even greater additional risk compensation for holding the company's bonds.
Meanwhile, according to ICE Data Services, the spread on SpaceX five-year credit default swaps (CDS) widened by as much as 0.8 basis points to about 232.6 basis points, reversing its earlier narrowing trend.
Credit default swaps are generally regarded as an important market indicator of corporate credit risk. A widening spread means the cost for investors to buy protection against debt default risk is rising, and it also reflects heightened market concerns about a company's future debt-servicing capacity and financing pressure.
Notably, SpaceX's CDS spread continued to climb for most of October and repeatedly hit new monthly highs, indicating that bond investors are paying increasing attention to its capital expenditure plans.
However, in sharp contrast to the cautious attitude in the bond market, SpaceX's equity investors reacted positively to the latest earnings report.
The earnings report SpaceX released on Tuesday showed that for the third quarter ended September 30, the company achieved net profit of $4.4 billion, far above Wall Street's expectation of $1.88 billion. At the same time, revenue surged 161% year over year, also exceeding analyst expectations.
Strong profit and revenue growth pushed SpaceX shares up as much as 12.44% on Wednesday. Currently, the company's market value exceeds $2 trillion, making it one of the most closely watched AI infrastructure investment targets in global capital markets.
Yet despite the strong performance, the capital expenditure signals SpaceX management sent during its earnings call triggered a different interpretation in the bond market.
SpaceX Chief Financial Officer Bret Johnsen said on Tuesday that the company is actively investing in three areas it believes can generate the highest long-term returns, including the AI computing power business under its Super Intelligence division, as well as the Starlink satellite broadband and mobile communications businesses.
Johnsen emphasized that the company plans to maintain its investment-grade credit rating while accelerating investment, but management's upbeat comments on the future scale of investment still raised market concerns that SpaceX may further increase its debt.
In fact, SpaceX had already raised substantial funds through the bond market. In June of this year, the company raised $25 billion through multiple bond offerings, an important source of funding to support its business expansion.
In addition, media reported earlier this month that SpaceX is in talks with banks and investors to raise about $40 billion for the purchase of NVIDIA (NVDA.US) AI chips. This means that as SpaceX continues to expand its AI computing infrastructure, its future financing needs may increase further.
Johnsen said on Tuesday's earnings call that the company is currently in discussions with multiple debt capital providers to support its rapidly growing business. He noted that SpaceX still has a variety of available debt financing channels and is evaluating how to use these funding sources to support the company's future development.
For bond investors, the question is not whether SpaceX's current earnings performance is strong, but whether the company's huge future capital expenditure needs will lead to a rapid rise in debt levels and further affect its credit condition.
This concern is not unique to SpaceX, but is spreading across the entire large technology corporate bond market. As global technology companies continue to expand AI infrastructure investment, the market expects a new wave of large-scale corporate bond issuance in the future.
Data shows that so far this year, global companies have raised more than $450 billion in debt financing to support AI-related investment, compared with about $200 billion for all of last year. This means AI-related debt financing so far this year has reached more than twice last year's full-year level.
At the same time, as investors expect technology companies to further increase financing after third-quarter earnings are released, the credit risk indicators of some large technology companies have risen to new highs this week. Against the backdrop of continuously increasing bond market supply, investors are beginning to demand higher risk premiums to compensate for risks that may arise from rising future financing needs and a heavier debt burden.
For SpaceX, the divergence between the stock and bond markets reflects that investors are evaluating its rapid expansion strategy from different angles. Equity investors focus more on the revenue and profit potential brought by the rapid growth of the AI computing power business, while bond investors place greater emphasis on the scale of capital expenditure, future financing needs, and whether the company can maintain its investment-grade credit rating.
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