Meta Shares Plunge Over 5% as Credit Risk Indicator Hits Record High

Stock News
10/22

On Thursday, Meta (META.US) shares dropped more than 5% to $657.65.

According to regulatory filings disclosed by Meta, as of the end of September this year, the company's total committed future expenditures reached approximately $825 billion, covering leases, cloud computing contracts, and data centers, among other agreements, with a substantial portion of these funds directly tied to AI computing capacity and infrastructure development. This figure represents a sharp increase from the approximately $700 billion disclosed in July this year, with over $100 billion in new commitments added within just a few months.

Prior to this, Meta raised its full-year capital expenditure plan, lifting the lower bound of its 2025 capex guidance from the previous range of $130 billion to $145 billion up to $135 billion to $145 billion. The company also announced the creation of a new class of non-voting stock to provide a potential financing tool for future acquisitions and other expenditures.

On Thursday, the price of five-year credit default swaps (CDS) measuring Meta's credit risk surged to an all-time high, and the company's bonds weakened significantly relative to U.S. Treasuries. This reflects investors' deep-seated concerns that tech giants' continued borrowing for AI expansion will further intensify pressure on an already oversupplied bond market.

According to ICE Data Services, the five-year credit default swap price on the company's debt rose by as much as 8.9 basis points to approximately 119.3 basis points per year. Credit default swap prices rise as investor concerns intensify. This marked the highest intraday level since the swap contract began actively trading about a year ago.

On the same day, debt protection costs also rose for other hyperscale cloud providers and chip manufacturers, including credit default swaps linked to Oracle (ORCL.US), Microsoft (MSFT.US), and Broadcom (AVGO.US).

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