Meta seeks $20 billion in bonds to fund AI push

Meta Platforms is preparing to sell between $20 billion and $25 billion in corporate debt on Tuesday. The company intends to use the proceeds to finance its expanding artificial intelligence infrastructure, including new model development and related services. This is the second major bond issuance for Meta in the past seven months.

Sources familiar with the transaction stated that the debt structure will be split. Two-thirds of the total amount will be issued in U.S. dollars, while one-third will be issued in euros. Meta has not commented on the specific terms of the sale. Final pricing for the bonds is expected to be determined by Tuesday afternoon.

The decision to borrow in multiple currencies aligns with the company's global operations. Raising funds in both major currencies allows Meta to manage currency exposure. It also enables the firm to match its liabilities with its international revenue streams. This approach is common among large multinational corporations seeking to optimize their capital structure.

Meta's move to the bond market follows a recent change in its credit rating. S&P Global Ratings adjusted the company's outlook from stable to negative earlier this month. The agency maintained Meta's AA- long-term rating. S&P cited uncertainty surrounding the company's substantial capital expenditure and its recent negative free cash flow as key factors in the decision.

Meta disclosed its increased spending plans in its third-quarter earnings report released last month. The company now expects full-year capital expenditure to fall between $135 billion and $145 billion. This range represents a $5 billion increase at the lower end compared to previous guidance. The additional spending is directed toward data centers and computing power required for AI training and inference.

The financial impact of these investments is visible in the company's cash flow metrics. Meta reported negative free cash flow of $2.12 billion for the most recent quarter. This result places Meta in the same category as Alphabet and Amazon. Both companies have recently reported negative free cash flow figures due to heavy investments in technology infrastructure.

Meta has been actively accessing capital markets to support its strategic initiatives. The company previously raised $25 billion through a bond sale in April. Last week, Meta announced a broader plan to raise a total of $95 billion for its AI ambitions. This plan includes $35 billion from underwritten public equity offerings and $60 billion via an at-the-market stock program.

The capital raise comes at a challenging time for Meta's equity price. The stock dropped in 12 of the prior 14 trading sessions before Tuesday. October marked Meta's worst monthly performance in four years. Investors expressed concerns over the pace of spending and the timeline for returns on these AI investments.

Despite the recent sell-off, Meta's shares found support on Tuesday. The stock rose by 2.7 percent following the news of the debt offering. Market participants are assessing the company's ability to convert its substantial capital expenditures into future growth. Investors will watch closely to see if the increased spending begins to yield tangible results in user engagement and advertising performance.

Meta's financial decisions will remain under close scrutiny as it continues to scale its AI operations. The balance between aggressive investment and financial stability will be critical in determining how the market perceives its long-term value. The company's next major financial update is scheduled for its fourth-quarter earnings release.