Apollo Global Management Inc. has recorded approximately $250 million of paper profits on debt it bought to support Elon Musk’s artificial-intelligence startup xAI, people familiar with the situation told Bloomberg. The firm’s combined exposure totals $7 billion in loans that are part of an arrangement giving xAI access to Nvidia Corp. graphics processing units.
According to those individuals, Apollo acquired roughly $3.5 billion of xAI debt in December at 99 cents on the dollar. The loans carry a 10% coupon. News of xAI’s merger with SpaceX, announced on Feb. 3, pushed the market price of that December tranche as high as 106 cents, producing a marked improvement in valuation.
Apollo syndicated about half of the December position to its clients at the original 99-cent level while retaining the remainder. On the portion it kept, the firm recorded roughly $120 million in paper gains as trading moved the retained loans higher. The firm also purchased an additional $3.5 billion of loans in February; those holdings have appreciated as well and accounted for about $100 million more in unrealized gains, the people said.
Some of the debt from the February purchases was sold at the 99-cent issue price to insurers and other asset managers, while Apollo continued to engage in trading of the xAI loans it acquired earlier in the year. The firm has been expanding its private credit trading capabilities by building a marketplace and collaborating with banks to provide more real-time pricing. Separately, Apollo traded nearly $10 billion of high-grade private loans over the past year, illustrating the scale of its activity in this market.
All of Apollo’s xAI-related debt is held through a special-purpose vehicle overseen by Valor Equity Partners. That SPV is tasked with enabling xAI to rent chips for its Colossus 2 data-center site in Memphis, according to the people who spoke to Bloomberg.
Contextual note: the gains referenced above are characterized in reporting as paper gains, indicating they are unrealized and reflect mark-to-market movements in the secondary trading of these private loans.