Meta eyes record $95 billion equity raise to fund AI expansion

Meta Platforms (META.O) said yesterday (27 October) it plans to raise up to $95 billion in its largest-ever equity fundraising, as the social media giant spends aggressively on expanding its AI infrastructure.

The Facebook parent has launched public offerings worth about $35 billion in common and preferred stock, and said it also plans to launch a separate at-the-market share sale programme worth up to $60 billion.

The company will launch the larger share sale programme after its new non-voting Class C shares begin trading, which is expected in the first quarter of 2027, but said it has not yet finalised the timing and terms of the sale.

Meta's fundraising plan, among the biggest by an AI company, has also drawn interest of up to $5 billion in total from Nvidia (NVDA.O), Advanced Micro Devices (AMD.O) and Broadcom (AVGO.O) for Class A shares.

Their funding interest adds to concerns about an increasingly circular flow of capital in the AI industry, as chip suppliers help finance the expansion of one of their biggest customers.

Meta has been pouring money into chips and data centres to compete more effectively with 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 fell about 1.4% in morning trading.

The latest fundraising further underscores a shift among big technology companies increasingly tapping debt markets and raising equity to bolster their AI infrastructure, having previously relied on cash to fund their investments.

Earlier this year, Alphabet increased the size of its equity offerings to $84.75 billion.

Separately on Monday, SpaceX said an affiliate of Apollo Global Management (APO.N) would buy AI chips and server hardware and lease them to the rockets-to-AI firm, in a deal with total principal payments of about $40 billion.

Meta's AI spending is burning cash

Meta has committed to spending about $825 billion in the future, primarily driven by its growing investments in data centres, AI-related infrastructure and cloud computing power.

But the aggressive expansion has eroded its historically strong free cash flow.

The company reported a cash burn of $2.12 billion in the third quarter, its first negative free cash flow in more than a decade, compared with positive cash flow of $10.63 billion a year ago.

Still, the early popularity of its consumer-focused AI agent Muse and the release of a competitive new series of AI models have helped partly justify Meta's aggressive 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 had cash, cash equivalents and marketable securities of $82.45 billion and long-term debt of $80.92 billion as of 30 September, according to its latest quarterly filing.

Last week, Meta raised the lower end of its annual capital expenditure forecast to a range of $135 billion to $145 billion.

The company has said it would issue Class C common stock in January 2027, effectively resulting in a two-for-one split, to fund acquisitions and retain top talent while maintaining CEO Mark Zuckerberg's control.

Meta agreed to grant Zuckerberg Class C shares that he can sell to help pay a potential California billionaire wealth tax, in exchange for a commitment to keep him in California.