Meta Platforms Inc., the parent company of Facebook, Instagram and WhatsApp, saw its shares plummet by 11.5% on Wall Street following a report that the company is planning to borrow $25 billion from capital markets in a 40-year bond issuance.
According to the report from the US, Meta is seeking to raise the funds at a yield 1.4% above the equivalent US Treasury bonds, translating to an annual interest rate of nearly 6%. The proceeds are intended to ramp up investments in data centers, with a particular focus on artificial intelligence infrastructure.
The announcement triggered investor concerns that Meta may be lagging behind in the AI race, prompting fears that it must now catch up with competitors. The steep drop in Meta's stock reflects those worries.
In a late-night earnings call, Meta CEO Mark Zuckerberg said the company planned to be significantly more aggressive in its AI investment strategy over the coming year. His comments appeared to reinforce concerns that Meta is playing catch-up in this rapidly growing sector. Investors are also worried that failure to scale up AI capabilities could ultimately threaten Meta's core business lines.
"We want to make sure we're not underinvesting in AI," Zuckerberg said during the call with analysts, adding that even if it meant taking on new debt, the long-term returns from AI investment would be worth it.
The company also released its latest financial results overnight, showing a 26% jump in quarterly revenue to $51.2 billion. Advertising remained the main driver of revenue, and Meta said it was increasingly using AI tools to optimize ad performance across its platforms.
Still, some investors voiced concerns that overinvestment in computing infrastructure could burden the company. In response, Zuckerberg argued that even if Meta ends up with excess computing power, it could later sell or repurpose it to generate profits.
Regardless, Meta is betting that its advanced computing resources will ultimately boost its bottom line through improved AI-driven advertising efficiency.
