Meta to sell $25 billion in its largest bond sale to expand AI
Meta Platforms Inc. announced on Thursday that it will raise a minimum of $25 billion through the sale of investment-grade bonds. This follows a statement from Mark Zuckerberg, the chief executive officer of Facebook, regarding his plans to increase investments in artificial intelligence in the coming year. Reports says that the sale is projected to be one of the largest corporate bond sales in the United States of America in 2025. The upcoming bond offering represents a continuation of a private bond deal that occurred earlier this month, valued at $27 billion. The transaction was utilized to fund a Meta data center initiative in Louisiana, situated in the United States. Blue Owl Capital Inc. holds a majority ownership stake in the venture, accounting for eighty percent of the total ownership, with a considerable percentage of the project’s debt having been initially acquired by Pacific Investment Management Company.
Meta’s latest offering serves as just one illustration of a growing trend where substantial financial support is being provided by major technology companies. Morgan Stanley reports that hyperscalers, which encompass leading technology firms like Meta, Microsoft, and Alphabet, are expected to invest nearly $3 trillion in data centers from now until the end of 2028. A source reports that approximately 50% of those expenditures will be sourced from the company’s internal cash flows, while the rest is anticipated to rely on credit markets. The corporation intends to allocate up to $72 billion for capital expenditures this year, with projections indicating that this figure will increase further in 2026. A significant portion of this spending will be directed towards the advancement of artificial intelligence infrastructure and the integration of AI services into major platforms like Facebook and Instagram.
Nevertheless, investors expressed unease regarding the declaration made by Meta, leading to a decline of up to 14 percent in the company’s share price on Thursday, following the revelation of the expenditure intentions. The agreement reached by Meta follows significant debt sales in the technology sector, including Oracle Corporation’s high-grade bond issue of $18 billion that occurred a month ago. Banks are currently engaged in a debt arrangement totaling $38 billion to support Oracle’s expansion of its data center. This agreement stands to become the most significant financing arrangement associated with artificial intelligence thus far. Meta intends to issue bonds in as many as six tranches, with maturities ranging from five to forty years. A report indicates that the yield on the 40-year bond is expected to be approximately 1.4 percentage points above the yield on the benchmark United States Treasury Bill.
Meta’s substantial investments in artificial intelligence are enhancing the company’s ad targeting and content recommendation systems, which remain fundamental to its business, as noted by President Zuckerberg and Chief Financial Officer Susan Li during their remarks to analysts. In the third quarter, Meta announced a 26 percent increase in sales, resulting in a total of $51.2 billion. This increase was primarily fueled by advertising, which constitutes nearly 98 percent of the company’s earnings.
