Meta targets $97.5 billion equity raise for AI infrastructure boost
Meta Platforms announced on Tuesday that it has raised its largest-ever equity fundraising to $97.5 billion, reflecting the company’s aggressive expansion of its AI infrastructure. The social media giant stated it was raising the common stock offering it disclosed on Monday from $22.5 billion to $25 billion, with a price set at $625.00 per share. Meta has set the price of its 250 million depositary shares at $50 each. The parent company of Facebook has initiated public offerings totalling approximately $35 billion in common and preferred stock. Additionally, it has announced plans to implement a distinct at-the-market share sale program, through which the company intends to sell shares incrementally at current market prices, with a potential value of up to $60 billion.
The company plans to initiate a larger share sale program following the commencement of trading for its new non-voting Class C shares, anticipated in the first quarter of 2027; however, the timing and terms of the sale have yet to be finalised. Meta’s fundraising initiative, one of the largest undertaken by an AI firm, has attracted interest totalling up to $5 billion from Nvidia, Advanced Micro Devices, and Broadcom for Class A shares. In a separate statement, Nvidia announced an investment of $3 billion in Meta’s equity offering. Their funding interest raises concerns regarding a progressively circular flow of capital within the AI industry, as chip suppliers contribute to the financing of the expansion of one of their largest clients. Meta has been investing heavily in chips and data centers to enhance its competitive position against OpenAI and Anthropic. “We expect investors to continue to question the financing and potential for future capital raises,” William Blair analysts said in a note. “Overall, we believe the financing reinforces both Meta’s confidence in the long-term returns from AI investment and the increasingly capital-intensive nature of pursuing that opportunity.”
The company’s shares experienced a decline of approximately 1.4% during the morning trading session. The latest fundraising further underscores a shift among large technology firms increasingly accessing debt markets and raising equity to enhance their AI infrastructure, after previously depending on cash to finance their investments. In June, Alphabet, the parent company of Google, raised its equity offerings to $84.75 billion. On Monday, SpaceX announced that an affiliate of Apollo Global Management will acquire AI chips and server hardware, subsequently leasing them to the rockets-to-AI firm. This transaction involves total principal payments approximating $40 billion. Meta has committed to spending approximately $825 billion in the future, primarily driven by increasing investments in data centers, AI-related infrastructure, and cloud computing capabilities. However, the aggressive expansion has diminished its historically robust free cash flow. The company reported a cash burn of $2.12 billion in the third quarter, marking its first instance of negative free cash flow in over a decade, in contrast to a positive cash flow of $10.63 billion from the previous year.
Nonetheless, the initial success of its consumer-oriented AI agent Muse, along with the introduction of a new competitive series of AI models, has contributed to validating Meta’s substantial investments. “We believe that Meta will ultimately produce a profitable AI business and its returns longer-term should help the company diversify, although the path may not be linear,” William Blair analysts said. The company reported $82.45 billion in cash, cash equivalents, and marketable securities, alongside $80.92 billion in long-term debt as of September 30, as per its latest quarterly filing. Last week, Meta adjusted the lower end of its annual capital expenditure forecast to a range of $135 billion to $145 billion. The company announced plans to issue Class C common stock in January 2027, effectively implementing a two-for-one split. This move aims to finance acquisitions and retain top talent, all while preserving CEO Mark Zuckerberg’s control. Meta has consented to provide Zuckerberg with Class C shares that he may liquidate to assist in covering a prospective California billionaire wealth tax, contingent upon his pledge to continue residing in California.
