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As the political situation in Texas worsened, SpaceX came under pressure over the state park land issue and AI regulatory concerns. The cost of credit default protection reached a record high, which also dragged down data center-related companies like Corewave.
texas Governor-elect Hinojosa on Thursday asked the state to block a possible salespacex State Park Land Case. investors are worrieddemocratic party After the victory, monitoring of the Artificial Intelligence (AI) industry will be strengthened. Not only did SpaceX’s stock price fall for two consecutive days, but its loan default protection costs also reached a new high.
Hinojosa held his first press conference after being elected. Texas Monthly reported last month that the state was considering selling land in Boca Chica State Park, with SpaceX as a potential buyer. Current Governor Abbott has stated that he will not vote on any deal in the near future. Hinojosa, who grew up in South Texas and frequently visited Boca Chica Beach as a child, opposed the land sale during the campaign.
Musk moved to Texas about six years ago and later moved the headquarters of Tesla and SpaceX there. The development of the two companies in Texas has been supported by Republican leaders such as Abbott. Hinojosa, the first Democrat elected as Texas governor since 1990, has advocated tighter restrictions on data center development, but did not discuss relevant policies at this press conference.
SpaceX’s 5-year credit default swap (CDS) spread rose 14.6 basis points on Thursday to 284.3 basis points, a record high. The increase in loan default protection costs was significantly higher than other large cloud players. The market is also evaluating whether after the Democratic Party gains control of Congress, it may intensify scrutiny of Musk’s companies, which will cause the expected merger of SpaceX and Tesla to face more resistance in the market. SpaceX just last week announced that it had signed equipment financing leases worth approximately US$40 billion with Apollo Global Management and Goldman Sachs for the purchase of AI chips. The banks are in talks to sell some of their financing positions, people familiar with the matter said.
Uncertainty about the prospects for building a Texas data center has also affected CoreWeave, which is relying on debt to fund expansion. The yield on one of the company’s bonds rose above 17%, reaching a new high, and the stock price also fell.
Loan default protection costs have increased only slightly for other large cloud players. Grid cost rules and strict permitting reviews, along with local opposition, could slow the next wave of expansion, said Schiffman, a Bloomberg Intelligence analyst. For some major technology companies, the subsequent reduction in spending and borrowing requirements will be beneficial to credit conditions.
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He asked the state government to suspend the Boca Chica State Park land case, which could be sold to SpaceX during the handover period, and opposed moving forward with the transaction at this stage, showing that the new government has clear reservations about the matter.
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Investors are worried that after the victory of the Democratic Party, it will strengthen the monitoring of AI and investigate Musk’s companies, due to which the share price of SpaceX continues to fall. The 5-year CDS spread rose to 284.3 basis points during the session, a record high.
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In addition to SpaceX, CoreWeave, which relies on debt to expand, was also hit, with its bond yield rising above 17%. The market also believes that if the review is tightened, the expansion and financing needs of other large cloud companies may also slow down.
