Despite losing over $200 billion in market value, Meta Platforms, Inc. remains committed to its aggressive AI spending spree.
On October 31, sources familiar with the matter revealed that the social media giant has enlisted Citigroup and Morgan Stanley to prepare a bond issuance totaling $25 billion, with maturities ranging from 5 to 40 years. This move comes just one day after Meta’s stock plummeted 11.3%, wiping out nearly $208 billion in market cap—its second-largest single-day drop in history. Investor concerns stem from the company’s massive capital expenditures.
CEO Mark Zuckerberg remains resolute. On October 29, he told analysts that "aggressively building capacity upfront is the right strategy" to lead in the race for "super AI." Meta expects capital expenditures to reach $72 billion this year, with even "significantly larger" growth projected for 2026, far exceeding prior estimates.
The impact of this record corporate bond issuance extends beyond Meta. Analysts note that the company’s massive debt offering has reopened the floodgates for corporate bond supply, contributing to rising U.S. Treasury yields. This suggests that Big Tech’s spending frenzy is not only reshaping the industry but also exerting tangible effects on broader macroeconomic and financial markets.
**Betting Big on AI, but Returns Remain Uncertain** Meta’s heavy AI investments face a unique challenge: its business model differs starkly from competitors like Microsoft and Google, which generate direct revenue from AI-driven cloud services. In contrast, Meta still relies overwhelmingly on advertising, leaving investors questioning how its AI spending will translate into returns.
Scotiabank analyst Nat Schindler noted that Meta "will need to see substantial new revenue streams to justify its ballooning capex." However, Zuckerberg argues that AI investments are already benefiting core operations, citing a 5% increase in user time spent on Facebook in Q3 due to AI-powered recommendations. Additionally, Meta boasts strong cash flow, ranking among the S&P 500’s top five companies with over $100 billion in annual operating cash flow.
**Record Bond Sale to Fuel Spending Spree** To sustain its AI ambitions, Meta is turning to debt markets. The $25 billion bond sale would rank among the largest corporate debt deals this year. Other tech giants are following suit—Oracle sold $18 billion in bonds in September—as the sector’s total AI infrastructure spending is projected to hit $400 billion in 2024.
Meta’s $72 billion capex represents 37% of its projected revenue, the highest ratio among Big Tech peers. Zuckerberg has warned that 2026 spending will grow "significantly larger," signaling even higher future investments. Notably, during a recent dinner with former President Trump, he revealed plans to invest $600 billion in U.S. data centers and AI infrastructure by 2028.
**Big Tech Capex Shakes Bond Markets** Meta’s financing needs are already influencing broader debt markets. After Fed Chair Jerome Powell hinted at slower rate cuts, Treasury yields climbed further as Meta’s bond issuance added pressure, pushing yields to multi-week highs.
The spending surge by U.S. tech giants on data centers and equipment is now a key driver of economic growth.