SpaceX Weighs $40 Billion Funding Package for Nvidia Chips as Buyback Math Draws Scrutiny

SpaceX weighs a $40B financing package for Nvidia AI chips as investors question how much free cash flow truly funds buybacks.

Two separate threads are shaping how investors read Nvidia this week: a potential multi-billion-dollar chip order tied to SpaceX, and a fresh debate over how much of the company's headline free cash flow actually reaches shareholders.

On the demand side, Reuters reported Tuesday that SpaceX is exploring a financing package worth $40 billion to fund purchases of Nvidia's AI chips. The structure under discussion splits roughly into $10 billion of bank loans and $30 billion of investment-grade debt, with Apollo expected to take the lead role. Talks remain at a preliminary stage, meaning the prospective order depends as much on the financing coming together as on SpaceX's appetite for the hardware. Completion of the reported transaction is anticipated in 2027 — a business opportunity for Nvidia, not a closed sale, and therefore not a figure that can be booked as secured revenue.

That distinction matters given the sheer size of the package. A funding plan and a completed chip purchase are separate milestones, and the next meaningful step for SpaceX would be a binding agreement rather than a headline number.

Analysts Split the Power Question

Running alongside the financing story is a debate over whether electricity shortages could slow the build-out of U.S. data centers. Morgan Stanley weighed in Monday, telling Reuters that Nvidia and Broadcom look comparatively insulated from these power constraints, while delays in bringing facilities online could hit suppliers of memory, optical and other components. The bank said its 2027 forecasts remain intact. That view doesn't erase the infrastructure problem — it narrows its likely reach, suggesting a slower data-center ramp need not weigh equally on every company in the chain.

Sentiment also got a lift Wednesday when Yorkville Ives initiated coverage on Nvidia with an outperform rating and a $300 price target. The bullish call adds another layer to the valuation case, though it does nothing to confirm that the SpaceX discussions will conclude.

The Buyback Headline Versus the Fine Print

Investors are also chewing over Nvidia's $235 billion repurchase authorization, which is drawing attention because heavy strategic outflows could leave far less for shareholders than the headline suggests. Nvidia has not officially changed how it calculates free cash flow. What's being debated is how much of that cash actually remains for distributions and buybacks.

For the first half of the fiscal year in question, reports cite official free cash flow of $69.9 billion. Fold in additional items, and the adjusted figure drops to roughly $21.7 billion — a decline of about 69% under that alternative lens. This is not a new company metric; it reframes the room available for shareholder returns from a different angle.

Among the items in play: $35.2 billion in net outflows for equity investments and $4.5 billion for taxes on employee stock. Add roughly $9 billion of buybacks used to offset stock-based compensation, and the picture shifts further. These line items serve different purposes. Equity investments tie up capital outside the core business, while buybacks meant to counter stock-based compensation dilution are not the same as repurchases that actually shrink the share count. Anyone assessing total shareholder returns should keep that gap in mind.

Over the same stretch, Nvidia raised $24.9 billion in long-term debt, adding another element to the cash-flow discussion. That does not mean the buyback authorization is being funded entirely with borrowed money. What counts is how operating cash, strategic investments and capital returns interact — the new debt belongs in that broader picture without being pinned to any single outlay.

Wall Street's Long-Range Bet

The Street expects Nvidia to generate more than $330 billion in free cash flow for fiscal 2028. That's a projection, not money already earned, and continued strategic spending could keep trimming the amount genuinely available for buybacks. The takeaway for investors isn't just the growth of reported free cash flow — it's what share survives strategic uses, and how much of any repurchase activity merely offsets dilution. Nvidia's large authorization signals a willingness to return capital. It doesn't guarantee the program will be carried out in full, nor that every dollar will come from ongoing operations.

Set against that, the SpaceX financing talks offer a demand-side catalyst that is still contingent. Analysts see further upside in the stock, but the reported incremental chip demand hinges on funding that has yet to be secured.