Meta's $30 Billion AI Gamble: Tech Giant Faces Investor Backlash Over Massive Infrastructure Spending

Meta has an AI product problem | TechCrunch

In the midst of an unprecedented AI buildout, Meta is spending more than most. The company is building two massive data centers, and reporting indicates there will be as much as $600 billion in spending on U.S. infrastructure over the next three years. Those figures might not raise eyebrows in Silicon Valley, but they're starting to make Wall Street nervous. The issue came to a head this week as Meta reported quarterly earnings, which showed the company's operating expenses jumping $7 billion year-over-year and nearly $20 billion in capital expense. It was the result of intense spending on AI talent and infrastructure, which has yet to bring in meaningful revenue for the company. When analysts pressed for more specifics, Mark Zuckerberg made it clear the spending was just getting started. "The right thing to do is to try to accelerate this to make sure that we have the compute that we need, both for the AI research and new things that we're doing, and to try to get to a different state on our compute stance on the core business," Zuckerberg told analysts on the call. "Our view is that when we get the new models that we're building in MSL in there and get like truly frontier models with novel capabilities that you don't have in other places, then I think that this is just a massive latent opportunity." If his goal was to reassure investors, it didn't work. By the end of the call, Meta's share price had plummeted in value. Two days later, the rout has only deepened. The Meta's stock dropped 12% by the closing bell on Friday, representing more than $200 billion in lost market cap. It's dangerous to read too much into stock prices, and in strict financial terms, Meta's quarterly earnings weren't that bad. ($20 billion in quarterly profit is nothing to complain about.) But this was the first quarter in which Meta's aggressive AI spending on both talent and infrastructure had a visible impact on the company's bottom line. Even more alarming was that, aside from a lot of enormous data centers and well-compensated AI researchers, it wasn't clear what the money actually bought. Analysts pressed Zuckerberg on why he was spending so much on AI, and when they could expect to see revenue from the growing spending. But the call came at an odd spot in Meta's planning, with no clear budget for projected spending and no available product that could anchor a revenue forecast. As a result, Zuckerberg was left with only general claims about the promise of AI. "There are going to be all kinds of new products around different content formats, and we're starting to see that," he asid during the call. "And then there are the business versions of all these too, like business A ... the other part is how more intelligent models are just going to improve the core business and improve the recommendations that we make across the Family of Apps and improve the recommendations in advertising." Meta isn't the only company spending billions of dollars on AI infrastructure, so it's worth teasing out why this same spending isn't spooking investors at Google or Nvidia, both of which had a great quarter. OpenAI is the biggest offender, spending the same amount with far less financial cushion than Meta. There really are concerns that we're creating a bubble, and if we are, Meta's core business will let it ride things out better than most. But if you ask Sam Altman why he's spending hundreds of billions of dollars on compute, he'll tell you he's operating one of the fastest growing consumer services in human history -- and one bringing in $20 billion a year in revenue. We can argue about how sustainable the growth rate is (that's a separate blog post), but there really is a fast-growing product at the bottom of all the OpenAI hype. A fast-growing ARR figure goes a long way to answer questions. Meta doesn't have a product like that, and it's not clear where it's going to come from. The company's most powerful AI product is the Meta AI assistant, which Zuckerberg noted on the call has more than a billion active users. But those numbers are surely juiced by the three billion active users on Facebook and Instagram, and it's hard to see the current version of Meta AI as a competitor to ChatGPT. There's also the Vibes video generator, which really did boost daily active users, but has limited business impact beyond that. The most ambitious project is the Vanguard smart glasses released earlier this month. However, the glasses feel more like an extension of Meta's Reality Labs work than a real attempt to harness the power of LLMs. Put simply, these are promising experiments, not fully formed products. It's telling then that when he was pressed on infrastructure spending, Zuckerberg's response wasn't to point to the recent launches, but to focuse on the next generation. Zuckerberg stressed, while emphasizing the pending impact of the Superintelligence Lab's new models, that he was very excited about new products. "It's not just Meta AI as an assistant," he said. "We expect to build novel models and novel products, and I'm excited to share more when we have it." But this was an earnings call, not a product launch, so all he could say was that there would be more to share "in the coming months." As the market response showed that answer is wearing thin. To be fair, it's only been four months since Zuckerberg restructured his company's AI team, and the new Superintelligence team hasn't had time to launch an earthshaking AI product yet. But as the company spends billions of dollars to stay competitive in AI, there's still no clear indication of what role Zuckerberg wants to play in the new industry. Will Meta AI use the company's detailed store of personal data to grow into a ChatGPT competitor? Is Vibes the first step in a consumer entertainment play, building off Meta's targeted ad system? Or maybe Zuckerberg's references to "business AI" are hints at a more detailed enterprise play? So far, it's anyone's guess. Whatever the answer, the pressure is on Meta to find it -- and soon.

Meta to sell $30B in bonds to build AI datacenters

Zuckcorp will gladly pay you in 2065 for the eyewatering sums it is borrowing today Even the world's richest companies need outside help to fulfill their datacenter dreams. Now, Meta is selling $30 billion in bonds to build out its infrastructure estate and support its ambition in AI markets. Some of these won't mature for 40 years. The social media giant -- owner of Facebook, WhatsApp and Instagram -- launched the bond sale in an SEC filing last night with the help of banks Citigroup and Morgan Stanley. It comes as major cloud and infrastructure vendors announce ballooning capital investment plans to keep pace in the race for AI datacenter capacity. The Meta bonds were issued in six parts with varying interest rates and maturity between 2030 and 2065. Earlier this week, Meta posted $51.2 billion in revenue for its calendar Q3, up 26 percent year-on-year. Susan Li, Chief Financial Officer, told investors that its quarterly capital expenditure was at $19.4 billion, "driven by investments in servers, data centers and network infrastructure". "Our primary focus is deploying capital to support the company's highest order priorities including developing leading AI products, models, and business solutions. As we make significant investments in infrastructure to support this work, we are focused on preserving maximum long-term flexibility to ensure we can meet our future capacity needs while also being able to respond to how the market develops in the years ahead," she said. Li noted that Meta currently expects 2025 capital expenditures to be in the range of $70 billion to $72 billion, increased from its prior outlook of $66 billion to $72 billion. In 2024, the figure was $39.23 billion. As well as issuing bonds, Meta has entered a joint venture with Blue Owl Capital to fund its datacenter building. The fund will own an 80 percent interest while Meta will retain the remaining 20 percent ownership of the JV which is set to spend $27 billion on buildings, power, cooling, and connectivity for the Hyperion datacenter campus. A portion of capital raised will be funded by debt issued through a private securities offering. This week has seen an escalation in the datacenter arms race that cloud and AI companies say is necessary to stake their claim to the future of AI. Google's capital expenditure is set to triple in two years to hit $93 billion in 2025; in 2023, it stood at $32.25 billion. Microsoft's spending for the most recent quarter will be $34.9 billion, up from $24 billion the previous quarter. Amy Hood, Microsoft executive veep and CFO, said growth in capital expenditure would be higher next year. Oracle is also getting in on the act. Estimates suggest it will need to borrow $100 billion over four years to fulfill the demand of its $300 billion cloud compute contract with OpenAI. It has already launched an $18 billion bond sale and reports suggest it plans another $38 billion debt offering. Credit traders are now purchasing protection against Oracle defaulting on its borrowing, according to reports. Data from ICE Data Services said the cost of such insurance -- in the form of credit default swaps -- over the next five years is near its highest level since October 2023. Last month, management consultancy Bain & Company said the industry would need to spend $500 billion per annum on building datacenters to create the extra 100 gigawatts of capacity in the US needed by 2030 to meet demand for AI. ®

Credit market hit with $200bn 'flood' of AI-related issuance

US companies have issued more than $200bn worth of bonds to finance huge artificial intelligence-related infrastructure projects this year, as analysts predict the splurge will "flood" the broader market and store up new debt risks for credit investors. The tech giants that provide the cloud computing on which the internet is run at first financed their huge investments in data centres and related infrastructure primarily through their strong earnings and hefty balance sheets. But they have increasingly begun to tap debt markets to cover the mounting upfront costs of colossal new AI data centres, particularly as returns from the technology are still years away. Mark Zuckerberg's Meta sold $30bn of bonds this week to finance its AI projects. The sale was highly oversubscribed with about $125bn of orders, the largest ever demand in dollar terms for a corporate bond, according to two people close to the deal. Goldman Sachs had previously estimated that the $180bn worth of "jumbo" bond sales by the likes of Meta, Alphabet and Oracle meant AI-related issuance accounted for more than a quarter of all net supply of US corporate debt this year. "The highly rated tech issuers' huge appetite for debt to fund AI investment will divert demand from other areas of the corporate credit markets," said Gordon Shannon, a fund manager at TwentyFour Asset Management. Oracle sold $18bn of bonds in September -- also in a highly oversubscribed deal -- to help pay for the development of data centres it has leased to provide computing power to OpenAI. "These companies that have committed to huge builds for basically one customer are going to have to raise expensive capital," said Gil Luria, head of technology research at DA Davidson. "The bonds we're seeing at the moment haven't been too expensive because of the point of the cycle we're at, but the companies are going to need hundreds of billions of dollars more." He added: "If the markets end up investing hundreds of billions of debt in rapidly depreciating assets that may not have sufficient returns, the risk could become systemic." In a note on Friday, analysts at Barclays said that while "the AI wave has not been a major driver of supply in our market . . . several deals this year show the potential to shift this picture dramatically", adding that such issuance was the "largest elephant in the room" for many investors. "Surging capex volumes could finally break the dam and lead to a flood of issuance that we have not previously forecast," they added. Senior fund managers said the wave of sales would force fixed-income investors to reckon with the same questions as stock investors about the sustainability of the AI spending boom. Fraser Lundie, global head of fixed income at Aviva Investors, said the surge in issuance raised "important questions about concentration risk [and] capex sustainability". He added that it could increase the broader US investment-grade credit market's sensitivity to interest rates, given the long duration of the bonds being sold by the tech groups. Goldman's analysts called 2025 "a banner year for AI-linked net issuance" and predicted that the streak of bond sales to finance data centres and related energy infrastructure would continue in 2026. The groups are issuing at a time of rampant demand for corporate credit, which earlier this year sent US credit spreads to their lowest level this century. "This pick-up in issuance is occurring at a time when inflows into the asset class remain firm, helping to absorb new paper," said Jason Borbora-Sheen, a portfolio manager at asset manager Ninety One. Other fund managers warned of the broader risks of funding the next leg of capex through the capital markets, rather than companies' own cash generation, if fears of an AI "bubble" were realised. "If this leaves much more bad debt in the system, it could have more negative consequences," said Kevin Thozet, a member of the investment committee at Carmignac. "And to make things even more tricky, some of it is financed through private debt, so it's quite opaque."

Meta to raise $25bn from bond sale amid soaring AI costs

Meta is planning to raise $25bn from a bond sale to help it pay for soaring artificial intelligence costs, even as the Big Tech group's share price fell amid concerns that its spending is too high. The social media group has hired Citigroup and Morgan Stanley to raise up to $25bn in debt, ranging from five to 40 years in maturity, in what would be one of the biggest bond sales of the year, according to two people close to the matter. It comes a day after chief executive Mark Zuckerberg warned that the US tech group would spend even more aggressively as part of an arms race to build the data centres and infrastructure powering the AI boom. Meta's shares fell 12 per cent after Wall Street's opening bell on Thursday -- wiping out about almost $240bn from its valuation -- as investors fretted over the tech group's huge outlay. The sale underscores how technology giants are increasingly turning to the debt markets as they spend record sums to build AI infrastructure. Meta raised $27bn of private debt from credit providers, including Pimco and Apollo, in recent months to fund construction of its huge "Hyperion" data centre in Louisiana. Oracle sold $18bn of bonds in September. Large tech companies are projected to invest $400bn on AI infrastructure this year, including buying computer chips and building data centres. On Wednesday, Meta, Microsoft and Google's parent Alphabet all disclosed larger than expected spending plans in the current quarter. The social media company said capex could hit $72bn by the end of the year and that spending growth would be "notably larger" in 2026, implying a number far in excess of an earlier forecast for $105bn. Zuckerberg defended huge spending on infrastructure for Meta's own use. He told analysts on Wednesday that it was "the right strategy to aggressively frontload building capacity" as part of the tech group's bid to be the first to build artificial superintelligence. At a recent dinner with US President Donald Trump, Zuckerberg said the company planned to spend $600bn on US data centres and AI infrastructure through 2028. Meta, Citigroup and Morgan Stanley declined to comment. The bond sale was first reported by Bloomberg.

The AI debt dilemma hits Big Tech earnings

Why it matters: Investors may not be willing to put up with the expense of an AI buildout forever, which could push some companies toward off-balance sheet financing methods that are harder to keep track of. Between the lines: Not all AI debt is created equal, Gil Luria, managing director at the investment firm D.A. Davidson, tells Axios. * Microsoft's fortress balance sheet and strong management makes higher capex a bullish signal, he says, as it indicates strong demand for AI. * That's not the case, however, across the technology sector. Some companies are taking on debt to fund demand that isn't there yet. Zoom in: Take Oracle, whose debt is expected to double to more than $290 billion by fiscal 2028, according to Morgan Stanley. * There is an overbuild risk, and that kind of speculation is better financed through equity than debt, Luria says. This is a similar dynamic at the likes of CoreWeave, Crusoe and others, he adds. * There is also no clear end in sight. With every new Nvidia chip, AI players must spend more to upgrade if they want a chance at competing, making it unclear when this record spending spree can start to slow down. Reality check: If you think the AI buildout will pay off, then financing it with debt makes sense. * Big Tech firms don't want too much of this debt on their balance sheets since it could weigh on investor sentiment and their stellar credit ratings. * This debt is easier to finance over time given the lack of clarity around the return on AI investment. Luria thinks the AI narrative could turn out well. What to watch: Whether AI can generate enough productivity and revenue to justify these massive capital investments.

AI giants turn to massive debt to finance tech race

Meta raised $30 billion in debt on Thursday, as tech giants flush with cash turn to borrowing to finance the expensive race to lead in artificial intelligence. On a day when Facebook-parent Meta's share price plunged on the heels of disappointing quarterly earnings, demand for its bonds was reportedly four times greater than supply in a market keen to hold the social networking titan's debt. The $30 billion in bonds scheduled to be repaid over the course of decades is intended to provide money to continue a breakneck pace of AI development that has come to define the sector. "(Mark) Zuckerberg seems like he's got no limit in terms of his spending," said CFRA Research senior equity analyst Angelo Zino. Zino noted that Meta takes in more than $100 billion a year, and that while Wall Street may be concerned with Zuckerberg's spending it sees little risk debt won't get repaid. "(But) they just can't use up all their excess free cash flow and completely leverage it into AI." The analyst wouldn't be surprised to see Meta AI rivals Google and Microsoft opt for similar debt moves. Shareholder worry over Meta spending, on the other hand, is believed to be what drove the tech firm's share price down more than 11% during trading hours on Thursday. Meta's debt, however, drew flocks of investors despite rates for corporate bonds being at decade lows, noted Byron Anderson, head of fixed income at Laffer Tengler Investments. "Is there some worry about the AI trade? Maybe," Anderson said. "But the revenue and profit coming off that company are massive." If not for a one-time charge related to US President Donald Trump's Big Beautiful Bill, Meta would have recorded $18.6 billion in its recently ended quarter. That amount of net income is more than General Motors, Netflix, Walmart and Visa profits for that quarter combined. FOMO? Anderson doubts that so-called fear of missing out on the AI revolution drove demand for Meta's bond. "I don't think this was FOMO," he said. "People want good quality names in their portfolios at attractive levels, and this is a high-quality name -- just like Oracle." Business cloud application and infrastructure stalwart Oracle is reported to have raised $18 billion in a bond offering last month. According to Bloomberg, the Texas-based tech firm is poised to issue an additional $38 billion in debt, this time through banks rather than bond sales. Debt taken on by major AI firms is typically secured by physical assets, such as data centers or the coveted graphics processing units (GPUs) vital to the technology. Given the cash flow and physical assets of tech titans, risk is low for lenders. And the markets have been shaking off the possibility of an AI bubble that might burst. Meta just days ago announced creation of a joint venture with asset manager Blue Owl Capital to raise some $27 billion for datacenter construction. Meta and Oracle are also benefiting from recent moves by the US Federal Reserve to reduce the cost of borrowing. The trend toward debt is new for internet giants long accustomed to having ample cash flow to pay for what they want. Crucially, debt markets would not be as welcoming to AI startups such as OpenAI, Anthropic or Perplexity which have yet to turn profits. "I learned in my profession that if a company is not making profits and they issue (debt), that is a risky proposition," Anderson said. The analyst reasoned that young AI companies like those will have to raise money through equity stakes -- where the financier gets a stake in the company -- as they have done so far. "I don't know why they would go into the debt market," Anderson said of such startups. "It would be too expensive for them," he added, meaning the lenders would charge them much higher rates than the likes of cash cows like Meta.

Meta's $27 billion bet turns AI compute into Wall Street's hottest new investment | Fortune

"This is where capital markets meet compute," said Sean McDevitt, a partner at management consulting firm Arthur D. Little, which provided commercial due diligence advice to Meta. Traditionally, tech giants like Meta, Google, and Microsoft have funded their data center buildouts directly. This time, Meta is partnering with Blue Owl Capital, a private-credit investment firm, on the $27 billion data center known as Hyperion. As reported by The Wall Street Journal, Blue Owl owns 80% of the project, while Meta holds 20%, operating and leasing the facility long-term. BlackRock bought more than $3 billion of bonds that the joint venture (dubbed Beignet) issued last week to finance the project, in a sale arranged by Morgan Stanley. The deal stands out for its scale -- the largest private-debt offering ever -- and for its A+ rating from S&P, which reflects Meta's backing of the project (albeit with just a single agency rating). Yet the debt had a yield of 6.58% at issue, a level closer to high-yield, or "junk," bond territory. That structure allows Meta to build its data center without putting the full $27 billion of debt on its own balance sheet. The approach -- known as a special-purpose vehicle (SPV) or off-balance-sheet financing -- is largely new territory for hyperscale infrastructure. "By being able to access outside capital, you're not limited to your own free cash flow generation," McDevitt said. "You're bringing on investors with return profiles on an infrastructure-type investment that allows companies to build bigger, larger, quicker, and faster." He compared it to taking out a mortgage: you can buy a bigger house -- or, in this case, build more data centers -- by borrowing instead of paying cash up front. McDevitt believes the Hyperion deal could become a template for the industry. He estimates that roughly $150 billion in AI-driven data center construction is coming in the next few years. If other hyperscalers -- Microsoft, Google, Amazon, and OpenAI among them -- adopt similar models, capital markets rather than tech companies themselves will effectively fund the infrastructure of the AI era. "This is replicable," he said, though he cautioned that it remains to be seen how the project performs in practice. "Now what has to happen? Meta has to build this thing, then put workloads in it and operate under the presumption that they'll monetize those computing loads driven by AI in the future," McDevitt added. That is precisely where criticism of the deal lies: According to Global Data Center Hub analysis, "If AI workloads or margins stumble, these SPVs could echo the dark-fiber overbuild of the 1990s vast capacity sitting idle while debt remains outstanding." Still, for now, there's no reason to think other major banks won't try the same thing, said McDevitt. "Why wouldn't others look to mimic [this deal]?" Joey Abrams curated the deals section of today's newsletter. Subscribe here.

AI giants turn to massive debt to finance tech race

New York (AFP) - Meta raised $30 billion in debt on Thursday, as tech giants flush with cash turn to borrowing to finance the expensive race to lead in artificial intelligence. On a day when Facebook-parent Meta's share price plunged on the heels of disappointing quarterly earnings, demand for its bonds was reportedly four times greater than supply in a market keen to hold the social networking titan's debt. The $30 billion in bonds scheduled to be repaid over the course of decades is intended to provide money to continue a breakneck pace of AI development that has come to define the sector. "(Mark) Zuckerberg seems like he's got no limit in terms of his spending," said CFRA Research senior equity analyst Angelo Zino. Zino noted that Meta takes in more than $100 billion a year, and that while Wall Street may be concerned with Zuckerberg's spending it sees little risk debt won't get repaid. "(But) they just can't use up all their excess free cash flow and completely leverage it into AI." The analyst wouldn't be surprised to see Meta AI rivals Google and Microsoft opt for similar debt moves. Shareholder worry over Meta spending, on the other hand, is believed to be what drove the tech firm's share price down more than 11 percent during trading hours on Thursday. Meta's debt, however, drew flocks of investors despite rates for corporate bonds being at decade lows, noted Byron Anderson, head of fixed income at Laffer Tengler Investments. "Is there some worry about the AI trade? Maybe," Anderson said. "But the revenue and profit coming off that company are massive." If not for a one-time charge related to US President Donald Trump's Big Beautiful Bill, Meta would have recorded $18.6 billion in its recently ended quarter. That amount of net income is more than General Motors, Netflix, Walmart and Visa profits for that quarter combined. FOMO? Anderson doubts that so-called fear of missing out on the AI revolution drove demand for Meta's bond. "I don't think this was FOMO," he said. "People want good quality names in their portfolios at attractive levels, and this is a high-quality name -- just like Oracle." Business cloud application and infrastructure stalwart Oracle is reported to have raised $18 billion in a bond offering last month. According to Bloomberg, the Texas-based tech firm is poised to issue an additional $38 billion in debt, this time through banks rather than bond sales. Debt taken on by major AI firms is typically secured by physical assets, such as data centers or the coveted graphics processing units (GPUs) vital to the technology. Given the cash flow and physical assets of tech titans, risk is low for lenders. And the markets have been shaking off the possibility of an AI bubble that might burst. Meta just days ago announced creation of a joint venture with asset manager Blue Owl Capital to raise some $27 billion for datacenter construction. Meta and Oracle are also benefiting from recent moves by the US Federal Reserve to reduce the cost of borrowing. The trend toward debt is new for internet giants long accustomed to having ample cash flow to pay for what they want. Crucially, debt markets would not be as welcoming to AI startups such as OpenAI, Anthropic or Perplexity which have yet to turn profits. "I learned in my profession that if a company is not making profits and they issue (debt), that is a risky proposition," Anderson said. The analyst reasoned that young AI companies like those will have to raise money through equity stakes -- where the financier gets a stake in the company -- as they have done so far. "I don't know why they would go into the debt market," Anderson said of such startups. "It would be too expensive for them," he added, meaning the lenders would charge them much higher rates than the likes of cash cows like Meta.

Billion-dollar salaries, massive investment - is Mark Zuckerberg's out-of-control AI spending rattling investors?

Meta AI Mark Zuckerberg spending 2025: Mark Zuckerberg's ambitious push into artificial intelligence is coming with a huge price tag, and Wall Street is starting to get concerned. During Meta's latest earnings call on Wednesday, the CEO revealed that the company now plans to spend between $70 billion and $72 billion on AI this year, slightly higher than its previous forecast of $66 billion to $72 billion, as per a report. The massive outlay is part of Zuckerberg's long-term vision to make Meta a leader in AI, but not everyone is convinced the spending spree will pay off, as per a Futurism report. Investors reacted sharply to the announcement. Meta's stock plunged more than 11% on Thursday and also dropped more than 2% on Friday, even though the company's revenue topped Wall Street's expectations. ALSO READ: Sam Altman slams Tesla after $50,000 Roadster refund request hits dead end following 7.5-year wait Brian Mulberry, portfolio manager at Zacks Investment Management, told The Wall Street Journal, "The total dollar spend is just kind of what hangs us up a little bit," adding, "They have to start doing a better job of showing us when that comes back to the balance sheet." Mulberry also questioned Meta's ability to turn its ballooning expenditures into profit, saying, "The return on invested capital is definitely a huge metric for us and the fact that they are being a little bit cagey and not quite upfront with what exactly is going on doesn't help soothe those fears," as quoted in the report. ALSO READ: What is Hindenburg Omen that was triggered yesterday? If you are an investor, do take note Meta's spending surge comes amid an AI race among tech giants. Competitors like Alphabet and Microsoft are also ramping up their investments, fueling fears of an AI bubble that could destabilize the broader economy if it bursts. Even Microsoft, which reported stronger-than-expected quarterly results, saw its stock fall nearly 3% this week as investors balked at its plans for higher spending, as per the report. For Zuckerberg, though, the gamble appears intentional. He told investors that it's crucial for Meta to move fast while AI momentum is building, saying, "It's pretty early, but I think we're seeing the returns in the core business. That's giving us a lot of confidence that we should be investing a lot more, and we want to make sure that we're not underinvesting," as quoted by Futurism. In pursuit of that vision, Meta has gone on a massive AI hiring spree, investing over $14 billion in AI startup Scale AI and even poaching its CEO, Alexandr Wang, to head Meta's new "Superintelligence Labs." The company has reportedly been offering massive pay packages, some worth tens of millions to more than $1 billion. However, cracks have started to show as the company revealed plans to cut hundreds of roles from its AI unit earlier this month. How much is Meta spending on AI? Meta plans to spend between $70 billion and $72 billion on AI in 2025, as per the Futurism report. Why are investors worried about Meta's AI spending? Investors are concerned that the huge costs could outweigh profits, as per the Futurism report.

Meta's Stock Dropped, but Its AI Strategy May Be Stronger Than Ever | The Motley Fool

The sell-off is understandable, but investors may be missing the bigger picture. Coming into Meta Platforms' (META 2.72%) third-quarter earnings report on Wednesday, investors were prepared for more spending on AI, but Meta's plans for 2026 seemed to be too much for them to stomach. The social media giant didn't give a specific number, but stressed its need for more infrastructure capacity, saying, "As we have begun to plan for next year, it has become clear that our compute needs have continued to expand meaningfully, including versus our expectations last quarter." Management added that capital expenditures "will be notably larger in 2026 than 2025." That news, along with a deferred tax valuation adjustment that crushed generally accepted accounting principles (GAAP) earnings, sent the stock down 6% after hours. The sell-off was a bit surprising, as investors seemed to have accepted that tech giants like Meta are going to spend massive amounts to achieve their AI goals. "Magnificent Seven" stocks continue to move higher, with most of the sector hitting record highs. The AI spending announcement also came as the company delivered another smashing earnings report. Let's take a look at the latest quarterly numbers before discussing the implications of its ramped-up AI spending. Revenue in the third quarter surged by 26%, its fastest growth in several quarters, to $51.2 billion, topping analyst expectations at $49.4 billion. Key metrics all show the core social media business continuing to deliver strong growth. Active people across its family of apps were up 8% to 3.54 billion from a year ago, while ad impressions rose 14% and price per ad was up 10%. Both of those trends supported its strong revenue growth, which came almost entirely from its advertising business. Operating margin narrowed from 43% to 40% as the company stepped up its investments in research and development, as it continued to push into AI. Backing out a one-time, non-cash charge of $15.93 billion changes in the tax code from the Big Beautiful Bill, its earnings per share increased from $6.03 to $7.25, ahead of the consensus at $6.71. If it seems like Wall Street might be more skeptical of Meta's AI plans than it is of its big tech peers, there's a good reason for that. Unlike Microsoft, Amazon, and Alphabet, Meta doesn't have a cloud computing business. For the so-called big three cloud-computing companies, much of their capital expenditures come from expanding capacity to serve customers, building out their own AI capabilities along the way. Meta raised its capital expenditure forecast from $66 billion to $72 billion to $70 billion to $72 billion, and that's now expected to grow substantially next year. CEO Mark Zuckerberg talked up the company's efforts in superintelligence, or artificial intelligence that surpasses human intelligence, in addition to powering its advertising and recommendation engine on its apps. As Zuckerberg sees it, the company is positioning itself to capitalize on the transformative innovations to come from AI. He said, "The upside is extremely high for both our existing apps and new products and businesses that are becoming possible to build." Meta continues to lose an incredible amount of money on Reality Labs, the division committed to developing next-gen technologies like AI. Through the first three quarters, Meta has reported an operating loss of $13.2 billion from Reality Labs, but the company can afford to do that as it made more than five times that in operating profit from its apps. Zuckerberg also acknowledged the risk of being overambitious in its buildout, saying in the worst case, it would slow down building new infrastructure and grow into what it's built if progress to superintelligence takes longer than expected. Overall, Meta is still in control of its spending, and the roadmap is clear. While investors never like to see expenses jump, it's a reasonable choice to make. We should get a forecast for 2026 capital expenditures from Meta when it reports fourth-quarter earnings in a few months.

AI giants turn to massive debt to finance tech race

Meta raised $30 billion in debt on Thursday, as tech giants flush with cash turn to borrowing to finance the expensive race to lead in artificial intelligence. The trend toward debt is new for internet giants long accustomed to having ample cash flow to pay for what they want. Meta raised $30 billion in debt on Thursday, as tech giants flush with cash turn to borrowing to finance the expensive race to lead in artificial intelligence. On a day when Facebook-parent Meta's share price plunged on the heels of disappointing quarterly earnings, demand for its bonds was reportedly four times greater than supply in a market keen to hold the social networking titan's debt. The $30 billion in bonds scheduled to be repaid over the course of decades is intended to provide money to continue a breakneck pace of AI development that has come to define the sector. "(Mark) Zuckerberg seems like he's got no limit in terms of his spending," said CFRA Research senior equity analyst Angelo Zino. Zino noted that Meta takes in more than $100 billion a year, and that while Wall Street may be concerned with Zuckerberg's spending it sees little risk debt won't get repaid. "(But) they just can't use up all their excess free cash flow and completely leverage it into AI." The analyst wouldn't be surprised to see Meta AI rivals Google and Microsoft opt for similar debt moves. Shareholder worry over Meta spending, on the other hand, is believed to be what drove the tech firm's share price down more than 11 percent during trading hours on Thursday. Meta's debt, however, drew flocks of investors despite rates for corporate bonds being at decade lows, noted Byron Anderson, head of fixed income at Laffer Tengler Investments. "Is there some worry about the AI trade? Maybe," Anderson said. "But the revenue and profit coming off that company are massive." If not for a one-time charge related to US President Donald Trump's Big Beautiful Bill, Meta would have recorded $18.6 billion in its recently ended quarter. That amount of net income is more than General Motors, Netflix, Walmart and Visa profits for that quarter combined. FOMO? Anderson doubts that so-called fear of missing out on the AI revolution drove demand for Meta's bond. "I don't think this was FOMO," he said. "People want good quality names in their portfolios at attractive levels, and this is a high-quality name -- just like Oracle." Business cloud application and infrastructure stalwart Oracle is reported to have raised $18 billion in a bond offering last month. According to Bloomberg, the Texas-based tech firm is poised to issue an additional $38 billion in debt, this time through banks rather than bond sales. Debt taken on by major AI firms is typically secured by physical assets, such as data centers or the coveted graphics processing units (GPUs) vital to the technology. Given the cash flow and physical assets of tech titans, risk is low for lenders. And the markets have been shaking off the possibility of an AI bubble that might burst. Meta just days ago announced creation of a joint venture with asset manager Blue Owl Capital to raise some $27 billion for datacenter construction. Meta and Oracle are also benefiting from recent moves by the US Federal Reserve to reduce the cost of borrowing. The trend toward debt is new for internet giants long accustomed to having ample cash flow to pay for what they want. Crucially, debt markets would not be as welcoming to AI startups such as OpenAI, Anthropic or Perplexity which have yet to turn profits. "I learned in my profession that if a company is not making profits and they issue (debt), that is a risky proposition," Anderson said. The analyst reasoned that young AI companies like those will have to raise money through equity stakes -- where the financier gets a stake in the company -- as they have done so far. "I don't know why they would go into the debt market," Anderson said of such startups. "It would be too expensive for them," he added, meaning the lenders would charge them much higher rates than the likes of cash cows like Meta.

Tech giants brace to spend billions more in CapEx as AI race heats up

Tech giants Alphabet (GOOG) (GOOGL), Amazon (AMZN), Microsoft (MSFT) and Meta Platforms (META) are spending billions of dollars to build AI infrastructure, and some have even raised their expectations for the next year as the AI race heats up. Meta ( Rising AI-driven capital expenditures are causing significant increases in total expenses, including higher depreciation and infrastructure costs, putting pressure on profitability for Meta, Alphabet, Microsoft, and Amazon. The strategic reasons include meeting growing demand from cloud and AI services, supporting new revenue opportunities, ensuring technical infrastructure readiness, and positioning to monetize future AI advancements. Some, like Meta, are raising debt via bond offerings while others combine cash CapEx, finance leases, and hybrid models of building and contracting third-party capacity for funding their AI infrastructure investments.

Is Meta Placing an Unrealistic Bet on AI? | PYMNTS.com

By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. CFO Susan Li said Meta expects capital expenditures to be "notably larger in 2026 than in 2025," with total expenses rising at a "significantly faster rate." The main costs are data centers, cloud contracts and AI talent. "We expect further upward pressure on capex as we expand compute capacity to support our AI roadmap," she said. The centerpiece of that spending is what Zuckerberg calls "personal superintelligence." Merriam-Webster defines superintelligence as "an entity that surpasses humans in overall intelligence," a concept still debated among researchers. As Bloomberg reported, experts disagree on whether it's achievable or merely theoretical. Meta's framing of "personal superintelligence" suggests something between a digital assistant and a personalized operating system, a model that learns from user behavior across Facebook, Instagram, WhatsApp and Quest devices. But in today's market, Meta's own models lag frontier leaders. Its Llama 3 model trails OpenAI's GPT-4, Anthropic's Claude and Google's Gemini on reasoning and multimodal benchmarks. While rivals license their foundation models to developers and enterprises, Meta releases its models open source and earns no direct revenue from them. Zuckerberg told analysts Meta is "aggressively front-loading building capacity so that we're prepared for the most optimistic cases." He added, "Some people think that we'll get there in a few years, others think it'll be five, seven years, or longer. I think it's the right strategy to aggressively front-load building capacity so that way we're prepared for the most optimistic cases." Building infrastructure without a clear definition of what success looks like leaves Meta exposed to the same pattern that has potentially derailed its "Metaverse." Reality Labs' operating losses still exceed $4 billion a quarter, according to Reuters. Its total metaverse burn has now pushed past $60 billion since 2020, underscoring the risk of chasing visions that lack commercial validation. This new AI vision risks the same fate. Unlike Microsoft, Google or Amazon, which have paired AI investments with clear revenue pathways, Meta continues to build for internal use. Microsoft monetizes OpenAI's models through Azure and Copilot subscriptions. Google sells Gemini and Vertex AI access via its cloud division, and also has a growing TPU business. Amazon's Bedrock and SageMaker platforms turn infrastructure into recurring enterprise revenue. Meta, by contrast, uses its AI for engagement, recommendation engines, ad ranking, and tools like Meta AI and Reels. Those may improve user metrics, but it's not clear how they will contribute to the bottom line. Zuckerberg described Meta's apps and ads business as "compute-starved," saying, "We really are taking a lot of the resources and using them to advance future things that we're doing." He acknowledged a "very high demand for additional compute both internally and externally," yet stopped short of saying Meta would sell capacity. "In the worst case," he said, "we would just slow building new infrastructure for some period while we grow into what we build." The company's workforce strategy reflects the same imbalance. Earlier this year, Meta acquired Scale AI and named its founder, Alexandr Wang, to lead Meta Superintelligence Labs. It also hired engineers and executives from Apple, OpenAI, and Thinking Machines, even as it laid off about 600 people in its AI division, including researchers from its FAIR unit. Zuckerberg continues to defend the pace of investment. "We keep on seeing this pattern where we build some amount of infrastructure to what we think is an aggressive assumption, and then we keep on having more demand to be able to use more compute," he said. "So, I think that suggests that being able to make a significantly larger investment here is very likely to be a profitable thing over some period." That "some period," however, remains undefined. Li said there is "no specific timeline for when capex will normalize," adding that Meta continues to "see opportunities to invest behind our long-term AI priorities."

Mark Zuckerberg Is Making a Wild Bet on AI -- and It's Best Summed Up in This Single Quote

For Meta investors, revenue growth is no longer the main thing to watch. Shares of Meta Platforms (META 2.62%) took a big hit following the social media company's most recent earnings report, when Meta forecast massive spending growth (measured by both expenses and capital expenditures) in 2026. The commentary on spending growth marks a good time for investors to take a step back and reassess whether the company's growth strategy is sensible or too risky. Sure, in the meantime, the company is firing on all cylinders. But with capital expenditures rising more than 100% in Q3 and expense growth expected to accelerate next year, the earnings growth algorithm is about to shift dramatically. Now investors will have to trust in Meta founder and CEO Mark Zuckerberg's vision -- because the sheer size and speed of the tech giant's infrastructure and AI (artificial intelligence) buildout means that the company is shifting into a period in which it's sacrificing profitability today in hopes of bigger profits later. Fortunately, Zuckerberg has some contingencies if the best-case scenario for AI's long-term potential takes longer than expected or fails to materialize. Capital expenditures are surging to build AI capacity In its third-quarter update, Meta lifted its 2025 capital expenditures outlook to between $70 billion and $72 billion, up from a prior range that previously started at $66 billion, and said expense growth in 2026 will accelerate as the company expands AI infrastructure and adds technical talent. But at least the quarterly backdrop was upbeat. Third-quarter revenue rose 26% year over year to $51.2 billion -- an acceleration from 22% growth in the second quarter, supported by higher ad prices and continued engagement gains. Across its family of apps, daily active users rose to more than 3.5 billion. And helping drive revenue growth, ad impressions increased 14% and average price per ad increased 10%. But here's where things get a little wild. Meta Chief Financial Officer Susan Li said that the company expects the dollar growth in capital expenditures to be "notably larger in 2026 and 2025." For context, the company's forecast for $70 to $72 billion in capital expenditures this year is up from just $39.2 billion last year. In other words, Meta is probably expecting to increase its capital expenditure outlays in 2026 by at least $45 billion, putting total capital expenditures for the year at somewhere around the ballpark of $115 billion or more. And that's just part of the equation. "We also anticipate total expenses will grow at a significantly faster percentage rate than 2025," Li explained in the company's third-quarter earnings call, "with growth primarily driven by infrastructure costs, including incremental cloud expenses and depreciation." Given that Meta expects full-year 2025 expenses to grow at a rate of 22% to 24% year over year to between $116 and $118 billion, Li's comments likely imply around $150 billion or more in 2026 expenses. Mark Zuckerberg's risky bet What are Meta executives thinking? Well, it all boils down to Mark Zuckerberg's massive bet on superintelligence -- a strategy that is best summed up in the following quote. "I think it's the right strategy to aggressively front-load building capacity so that way we're prepared for the most optimistic cases. That way, if superintelligence arrives sooner, we will be ideally positioned for a generational paradigm shift and many large opportunities." Zuckerberg said during Meta's third-quarter earnings call. What's Zuckerberg's fallback if the rise of superintelligence is slower than expected? "If it takes longer, then we'll use the extra compute to accelerate our core business -- which continues to be able to profitably use much more compute than we've been able to throw at it," he explained. The founder and CEO even has a contingency for a "worst-case" scenario. Not to worry, he says. In this case, the company simply built out new infrastructure in advance, allowing its core business to grow into it over time, he reasons. Meta has the balance sheet to take risks On the surface, Meta's big spending may sound extraordinarily risky. But I'd say it's just a moderate risk when viewed over the long term and in the context of the company's financial wherewithal. Still, it is a risk nevertheless. Driving home what makes the risk bearable is the company's lucrative economics and its cash-rich balance sheet. Even with capital expenditures rising more than 100% in Q3, the company generated nearly $11 billion in free cash flow. Further, Meta boasts a net cash and marketable securities position (cash and marketable securities minus debt) of nearly $16 billion. As long as Meta continues to generate positive free cash flow and maintains a net cash position on its balance sheet, I think it's OK for the company to build out its infrastructure in advance, giving it optionality for a potential future with a superintelligence.

Meta to raise $30 billion in its biggest bond sale as AI expansion costs rack up

Social media giant Meta Platforms is raising a massive $30 billion through its largest-ever bond sale. This significant funding aims to support Meta's extensive investments in artificial intelligence infrastructure. The company anticipates higher capital expenditures next year due to these AI ambitions. Major tech firms are collectively spending billions on AI development. Social media giant Meta Platforms will raise up to $30 billion in its biggest bond offering ever, it said in a filing on Thursday, as Big Tech rushes to fund the costly expansion of artificial intelligence infrastructure. Meta, navigating a period of intense investments in AI that is creating significant cost pressures, has flagged that its capital expenditure next year would be "notably larger" than in 2025. The company's shares closed down more than 11% on Thursday, as investors mulled a 32% increase in costs outpacing a 26% revenue jump. It is raising the funds through a six-part bond sale with maturities ranging from five to 40 years. Meta last tapped the bond market in 2022 with a $10 billion sale. The principal amounts for the bonds range from $4 billion to $6.5 billion and co-managers for the sale include Morgan Stanley, Allen & Company and Blaylock Van, among others. Last week, Meta struck a $27 billion financing deal with Blue Owl Capital, Meta's largest-ever private capital agreement, to fund its biggest data center project in Richland Parish, Louisiana, known as "Hyperion." Major tech companies, including Alphabet, Amazon.com, Meta, Microsoft and CoreWeave , are on track to spend $400 billion on AI infrastructure this year, Morgan Stanley estimates. Meta is also investing heavily to attract and retain top AI researchers and engineers as a talent war between tech firms intensifies. For the company's new and ambitious AI goals, CEO Mark Zuckerberg personally led an aggressive talent hiring spree for its recently reorganized AI unit: Superintelligence Labs. Employee compensation costs will be the second-largest contributor to the increase in costs next year, particularly AI talent, Meta CFO Susan Li said. Meta has also boosted the lower end of its capital expenditure outlook to between $70 billion and $72 billion this year, compared with its prior forecast of $66 billion to $72 billion. Fixed-income news service IFR and Bloomberg first reported details of the bond sale earlier on Thursday. Reports of the Meta bond sale had spurred selling of U.S. Treasuries for hedging purposes. Investors have flocked to large new corporate bond issues amid wider uncertainty in equity markets.

Is more AI supply coming? By Investing.com

Investing.com -- Bank of America analyst Yuri Seliger told investors in a note this week that the surge in borrowing to fund AI data center projects in recent weeks suggests more AI supply is coming. The analyst noted that borrowing to finance AI infrastructure "exploded in September and so far in October." According to BofA, "IG bond market supply from Meta ($30 billion), Oracle ($18 billion) and RPLDCI ($27 billion) totaled $75 billion," excluding "the $38 billion loan tied to Oracle / Vantage data centers that's being put together by banks." Seliger stated that this represents "a dramatic jump from the $37 billion average annual pace of supply prior to Covid." "The answer is 'probably yes,'" Seliger wrote, referring to whether more AI-related debt issuance is likely. He explained that the absence of AI funding in the investment-grade bond market before September reflected "the strong cash flow generation by the big tech firms (Amazon, Google, Meta, Microsoft, Oracle)." However, BofA believes Meta's recently announced spending increase "suggests the companies collectively may be reaching a limit on how much AI capex they are willing to fund purely from cash flows." Consensus estimates, the bank said, show "AI capex reaching 94% of operating cash flow less spending on dividends and share buybacks in 2025 and in 2026, up from 76% in 2024." While a ratio below 100% "means technically the firms don't need to issue debt to fund the spending," BofA said, "it's getting close." The analyst added that eliminating share buybacks could "take the ratio all the way down to low 70s," noting that "equity could be an attractive alternative given the elevated stock multiples."

Why Amazon's $125 Billion AI Bet Is Different From Meta's | Investing.com UK

When Amazon (NASDAQ:AMZN) announced it would spend roughly $125 billion on capital expenditures in 2025 (and even more in 2026), Wall Street responded with an 11% stock surge. When Meta (NASDAQ:META) announced similar massive AI infrastructure spending just hours earlier, investors punished the stock with a 12% collapse. Same industry, same AI narrative, opposite outcomes. For small investors trying to make sense of Big Tech's AI arms race, this divergence reveals something critical that's hiding in plain sight: Amazon may be the only company monetizing its AI infrastructure twice, once by selling it to customers through AWS, and again by using it internally to boost its retail and advertising businesses. This structural advantage explains why Amazon's capex binge looks like smart investing while Meta's looks like a gamble. The most obvious explanation for Amazon's stock surge is simple: AWS grew 20% to roughly $33 billion in Q3 2025, its strongest growth rate since 2022. Unlike Meta, which generates 98% of revenue from advertising, Amazon is building AI infrastructure it can immediately sell to enterprise customers. AWS already carries 30% operating margins, meaning every dollar of infrastructure spending generates profitable revenue within quarters, not years. Meta, by contrast, is asking investors to fund $72 billion in AI capex while acknowledging that current AI initiatives generate zero revenue. The company's CFO even admitted "advertising is no longer the priority" while simultaneously warning that capex would be "substantially larger" in 2026. For investors, that's a bet on unproven future returns, the exact narrative that burned them on the $70 billion metaverse experiment. Here's where most analysis stops. However, the real story goes much deeper. Amazon is building much more than data centers to sell AWS capacity to Microsoft, Anthropic, and thousands of enterprise customers. It's also making infrastructure that its own retail, advertising, and logistics operations can use at cost, not at the market rates it charges external customers. Let's think about what this means in practice: When Amazon builds a new AI chip cluster for $1 billion, it can: The second benefit is almost invisible in financial statements but potentially huge. Amazon's retail business operates on razor-thin margins, often 3-5% operating margins for online stores. If AI-powered systems can improve inventory forecasting by 2%, reduce return rates by 1%, or increase advertising click-through rates by 5%, those efficiency gains flow directly to the bottom line across a $280 billion retail operation. This is double monetization: the same capex dollar generates both external revenue (AWS sales) and internal cost savings (retail efficiency). Revenue Diversification: Meta generates 98% of revenue from advertising. Amazon generates just 9% from ads, with revenue spread across online stores (39%), third-party seller services (24%), AWS cloud (17%), advertising (9%), subscriptions (7%), and other services (4%). Let's compare Amazon's position to its Big Tech peers: Meta doesn't sell cloud infrastructure at scale, so every AI dollar is a pure cost that must be justified by future advertising improvement or new product revenue. There's no external customer paying Meta to subsidize its AI experimentation. To be fair, some Meta bulls argue the company is playing the long game, spending aggressively now to dominate AI infrastructure the way it dominated social networking, even if that means years of losses before monetization. The bet is that whoever builds the biggest, fastest AI infrastructure will own the next platform, and customer adoption will follow. But there's one critical difference: Meta's social networking dominance came with a clear monetization path (advertising) that proved out within 3-4 years of launch. AI infrastructure spending is now in year three with no comparable revenue stream visible. Amazon, by contrast, doesn't need to wait for a future payoff. It's monetizing infrastructure today through AWS while at the same time positioning for tomorrow's AI applications. Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) do have cloud businesses (Google Cloud and Azure), so they can monetize infrastructure externally. But neither has Amazon's integrated retail-plus-cloud model. Google doesn't run a $280 billion e-commerce operation that benefits from the same AI infrastructure it sells. Microsoft doesn't operate a global logistics network that can be optimized with AI chips it's already purchased for Azure. For this reason, Amazon uniquely combines: This creates structural pricing power that competitors lack. Amazon can afford to price AWS competitively because it's recovering value internally even if external margins compress. Meta has no such cushion. If you're evaluating Big Tech's AI spending, here are the critical questions about this hidden dynamic: 1. Is the company selling the infrastructure or just using it? Amazon sells it (AWS). Meta only uses it internally. That difference is worth billions in de-risked capex. 2. Can we quantify the internal efficiency gains? This is the hard part, and where small investors have leverage. Amazon doesn't break out how much AWS capacity is consumed internally versus sold externally. The company doesn't report transfer pricing between AWS and its retail segments. These are questions for earnings calls and shareholder meetings. Specifically, investors should ask: 3. Is advertising growth sustainable or inflated by AI subsidies? Amazon's advertising revenue grew 24% to $17.7 billion in Q3. That's impressive, but is some of that growth due to better ad targeting powered by AI infrastructure that's being depreciated across AWS, not advertising? If so, the advertising segment's profitability might be understated, and the true ROI of AI capex is higher than it appears. 4. What happens if AWS growth slows? If AWS reaccelerates to 20%+ growth, Amazon's double-monetization thesis strengthens. But if AWS growth decelerates back to 13-15% (as it did in 2023-2024), does Amazon's capex become a liability? The answer depends on whether internal efficiency gains are large enough to justify spending even without external AWS revenue growth. Here's a simple way to evaluate whether AI capex is sustainable across Big Tech: External Revenue ÷ Estimated Annual Depreciation Amazon's infrastructure pays for itself through external sales alone, before counting any internal benefits. Meta's doesn't. That's the divergence in one number. Both Amazon and Meta have signaled that 2026 capex will be even higher than 2025. For Amazon, that's a sign of strength. AWS demand is accelerating, and the company can fund growth from operating cash flow (which rose 16% to $130.7 billion TTM). For Meta, it's a red flag. Advertising growth is uncertain, and rising capex without proven AI monetization could turn free cash flow negative. Small investors have a narrow window to position themselves before this dynamic becomes consensus. The market is still treating Big Tech AI spending as a monolithic story ("everyone's spending big on AI"). But the underlying economics are very different. Amazon is building infrastructure it sells and uses. Meta is building infrastructure it only uses. That's the difference between a self-funding growth engine and a bet that requires everything to go right. If you're evaluating tech stocks for AI exposure, ask yourself: Who's monetizing the infrastructure, not just the applications built on top of it? Amazon is monetizing twice, externally through AWS and internally through retail efficiency. That double-layered return makes its $125 billion capex bill one of the safest AI bets in Big Tech. Meta, despite its strengths in AI research and model development, is still searching for its first monetization path. Until it finds one, every capex dollar is a leap of faith. For small investors, the lesson is clear: Follow the revenue, not the rhetoric. In the AI infrastructure race, Amazon isn't just spending more. It's spending smarter. And that structural advantage is worth paying attention to.

Meta to raise $30 billion in its biggest bond sale as AI expansion costs rack up

(Reuters) -Social media giant Meta Platforms will raise up to $30 billion in its biggest bond offering ever, it said in a filing on Thursday, as Big Tech rushes to fund the costly expansion of artificial intelligence infrastructure. Meta, navigating a period of intense investments in AI that is creating significant cost pressures, has flagged that its capital expenditure next year would be "notably larger" than in 2025. The company's shares closed down more than 11% on Thursday, as investors mulled a 32% increase in costs outpacing a 26% revenue jump. It is raising the funds through a six-part bond sale with maturities ranging from five to 40 years. Meta last tapped the bond market in 2022 with a $10 billion sale. The principal amounts for the bonds range from $4 billion to $6.5 billion and co-managers for the sale include Morgan Stanley, Allen & Company and Blaylock Van, among others. HEFTY INVESTMENT IN AI EXPANSION Last week, Meta struck a $27 billion financing deal with Blue Owl Capital, Meta's largest-ever private capital agreement, to fund its biggest data center project in Richland Parish, Louisiana, known as "Hyperion." Major tech companies, including Alphabet, Amazon.com, Meta, Microsoft and CoreWeave, are on track to spend $400 billion on AI infrastructure this year, Morgan Stanley estimates. Meta is also investing heavily to attract and retain top AI researchers and engineers as a talent war between tech firms intensifies. For the company's new and ambitious AI goals, CEO Mark Zuckerberg personally led an aggressive talent hiring spree for its recently reorganized AI unit: Superintelligence Labs. Employee compensation costs will be the second-largest contributor to the increase in costs next year, particularly AI talent, Meta CFO Susan Li said. Meta has also boosted the lower end of its capital expenditure outlook to between $70 billion and $72 billion this year, compared with its prior forecast of $66 billion to $72 billion. Fixed-income news service IFR and Bloomberg first reported details of the bond sale earlier on Thursday. Reports of the Meta bond sale had spurred selling of U.S. Treasuries for hedging purposes. Investors have flocked to large new corporate bond issues amid wider uncertainty in equity markets. (Reporting by Dagmarah Mackos, Anna Peverieri and Kanjyik Ghosh in Barcelona, and Jaspreet Singh and Arsheeya Bajwa in Bengaluru; Editing by Tomasz Janowski, Jan Harvey, Jane Merriman and Alan Barona)

Meta Platforms plans to sell $25 billion in bonds for AI infrastructure By Investing.com

Investing.com -- Meta Platforms Inc (NASDAQ:META) is planning to sell at least $25 billion of investment-grade bonds on Thursday, as the tech giant seeks funds for artificial intelligence infrastructure investments. The company aims to issue notes in up to six different segments with maturities ranging from five to 40 years, according to a report from Bloomberg News, citing people familiar with the matter who were not authorized to speak publicly. Initial pricing discussions for the 40-year bond indicate a yield of approximately 1.4 percentage points above benchmark Treasury rates, one of the sources said. The proceeds from the bond sale will be directed toward general corporate purposes, as Meta joins other technology companies in raising capital to support heavy investments in AI infrastructure. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.