Bill Ackman Says Elon Musk May Need to Borrow a Trillion Dollars for Data Centers, Keeping Rates High
Bill Ackman says Elon Musk might have to borrow a trillion dollars to open gigawatts of data centers, keeping rates persistently high, and that neoclouds are like levered real estate developers sensitive to the cost of capital “So, I think it is sustainable because, you know, intelligence is again an enormously valuable asset. And I think the demand therefore for the compute that enables intelligence, I think, is going to be sustained." "And, you know, the companies that are, you know, the hyperscalers that are building out a lot of this infrastructure have the financial resources, the creditworthiness in order to access the capital." "I worry more about the pure play neocloud companies that are a bit like highly levered real estate developers playing a theme. I think they’re much more at risk. They’re much more sensitive to the cost of capital." "But you have, I mean, SpaceX, Elon on the earnings call gave some projections for how many gigawatts of data centers he was going to open. If he meets his objective, he might have to borrow a trillion dollars of capital." "So, you have companies competing at sovereign levels for debt. And the result is, you know, this massive, you know, more and more supply of debt. So, I don’t see a world in which, you know, there’s a dramatic, you know, there’s a lot of demand for capital and a finite supply. So, I think that makes rates persistently high.”
Context
A well known investor arguing that AI data center debt could keep interest rates high adds to the debate over who can afford the AI buildout and at what cost.
Bill Ackman is a hedge fund manager who runs Pershing Square. Fireside Alpha is an X account that posts clips of investors and executives. Neoclouds are newer cloud companies that rent out GPU capacity for AI, often funded with debt.
Deep dive
Fireside Alpha posted a 71 second clip on Saturday of Bill Ackman speaking at a Milken Institute event. The post quotes Ackman at length.
In the quoted remarks, Ackman says he thinks AI demand is sustainable because intelligence is an enormously valuable asset, so demand for the compute behind it will last. He says the hyperscalers building much of the infrastructure have the financial resources and creditworthiness to access capital.
Ackman says he worries more about the pure play neocloud companies, which he describes as a bit like highly levered real estate developers playing a theme. He says they are much more at risk and much more sensitive to the cost of capital.
He then points to SpaceX, saying Elon Musk gave projections on an earnings call for how many gigawatts of data centers he plans to open, and that if Musk meets his objective he might have to borrow a trillion dollars of capital. Ackman says companies are now competing at sovereign levels for debt, and that a lot of demand for capital against a finite supply makes rates persistently high.
The trillion dollar figure is Ackman's own estimate, not a number from SpaceX. The post quotes an earlier Fireside Alpha clip of Musk explaining how SpaceX casts turbine parts to bring power online faster.
What to expect next
Watch whether SpaceX or Musk's companies announce large debt raises tied to data centers, which would test Ackman's estimate. Also watch borrowing costs for neocloud companies and whether any of them struggle to refinance if rates stay high. Further comments from other investors on AI debt, and moves in bond markets, will show whether this concern spreads. Earnings calls from hyperscalers may also reveal how they plan to fund their own buildouts.