Meta seeks $20bn-$25bn bond sale to fund AI spending

Meta is seeking to raise $20bn to $25bn in a bond sale on Tuesday, with two-thirds of the debt expected in US dollars and one-third in euros, according to people familiar with the matter cited by CNBC. Final pricing was expected Tuesday afternoon. Bloomberg News first reported the plan. Meta declined to comment.

Why Meta is borrowing

The sale comes days after S&P Global Ratings revised Meta's outlook from AA- stable to AA- negative on Friday, citing "uncertainty" about its capex spending and negative free cash flow. In its third-quarter report last month, Meta put full-year capex at $135bn to $145bn, a $5bn increase to the low end of previous guidance. It posted negative free cash flow of $2.12bn, joining Alphabet and Amazon.

Meta raised $25bn in an April bond sale. It said last week it plans to raise $95bn: $35bn in underwritten public equity offerings and $60bn through an at-the-market programme.

Investor caution

At the Hong Kong Monetary Authority's Global Financial Leaders' Investment Summit on Tuesday, Blackstone President Jon Gray said the scale of capital required for AI is creating concentration risks for debt investors, both across the sector and at individual companies. Lenders have limited upside because returns are largely confined to interest and principal, he said. Gray said financing the buildout would require a combination of public markets, banks and private capital, with companies turning to structured transactions to limit debt.

He said spending on AI models across Blackstone's portfolio companies had risen 20-fold over the past year as businesses saw financial benefits from uses including coding, customer engagement and content creation. Gray said demand for computing power was "running well ahead of supply".

Pimco CEO Emmanuel Roman, on the same panel, said about $550bn in AI debt had been issued in various forms so far this year. He said AI-related capital spending could reach around $10tn over the next five years, citing General Atlantic CEO Bill Ford's estimate, and compared that with a global corporate bond market of roughly $20tn. "At some point in time, it's going to be too much," Roman said.

Goldman Sachs wrote in a report on Monday that global data center demand will require about $8.5tn in capital spending over the next five years. Reuters reported from the summit that combined tech spending is set to exceed $730bn this year, up from about $700bn, and that Alphabet sold €6bn ($6.7bn) in bonds on Monday.

Meta's stock rose 2.7% on Tuesday after falling in 12 of the prior 14 sessions and closing October with its worst month in four years, according to CNBC.

What happens next

The pricing will show how much appetite remains for AI-related debt after Gray's and Roman's warnings. The $95bn programme, starting with $35bn in public equity, will test demand for Meta's shares. Roman said even with a mix of equity and debt, the amount required would be "gigantic".