Tech giant Meta, the parent company of Facebook, has announced the largest-ever debt offering, raising $10.5 billion through the sale of investment-grade bonds.Â
Powering AI advancements
This latest capital injection is set to power the social media giant’s relentless pursuit of advancements in artificial intelligence (AI) – a strategic focus that shows no signs of abating. “Meta’s sale is a clear sign that their investment in AI is not slowing down and is likely to increase over the next couple of years,” observed Analyst Robert Schiffman.Â
The added liquidity, Schiffman noted, reflects a more efficient use of capital, as Meta taps into the bond market rather than solely relying on its ample cash reserves. “Meta has an ample amount of cash, but it’s a more efficient use of capital to borrow money in the bond market,” he explained.
Mixed financial performance
Meta’s recent financial performance has been a mixed bag, with the company reporting better-than-expected second-quarter earnings last week. While its revenues beat forecasts, the company’s AI spending was not as hefty as some analysts had anticipated, causing its shares to surge by 5 percent in the aftermath.
However, the road ahead appears to be paved with even more substantial AI-related investments. Analysts had previously projected Meta’s capital expenditures in 2024 to range between $35 billion and $40 billion, but the company has now raised the minimum expected spending amount to a staggering $37 million. Furthermore, according to a recent research note by JPMorgan’s Doug Anmuth, Meta’s spending next year could reach as high as $50 billion.
Unwavering commitment to AI
Echoing this sentiment, Meta has confirmed that it expects “significant capital expenditures growth in 2025,” underscoring the company’s unwavering commitment to staying at the forefront of the AI race.
CEO Mark Zuckerberg remains bullish on the potential of Meta’s AI initiatives, believing that the recently released Llama 3.1 will be “the most advanced in the industry” by the start of the next year. With deep pockets and a willingness to outspend the competition, Meta is poised to continue its relentless pursuit of AI dominance, regardless of the financial implications.
Read more: Meta hits $1 trillion market cap, first time since 2021
Meta’s bond financing history
In 2023, Meta announced plans to raise $8.5 billion through a multi-part bond offering. This marked the company’s second foray into the bond market, coming on the heels of its successful $10 billion issuance the prior year (2022).
The bond deal included a 40-year security yielding a premium of 192 basis points over comparable U.S. Treasuries. The company stated it intended to direct the proceeds towards funding capital investments, repurchasing outstanding shares of its common stock, and pursuing potential acquisitions or other strategic investments.
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