Meta is raising nearly $100 billion in stock to fund its AI build-out, marking a stark shift in how Big Tech finances its costly technological moonshots. For a decade, the industry’s cash machines paid for every ambitious project out of pocket. Now, Meta is passing the hat to outside investors, embarking on a massive equity campaign that began with a high-stakes standoff between Mark Zuckerberg and the company’s board of directors.
The tech giant’s funding pivot comes as capital expenditures surge. Last quarter, Meta spent almost $34 billion on buildings and equipment, primarily for AI, while its core business brought in nearly $33 billion in cash. According to Yahoo Finance calculations, that spending pushed free cash flow negative for the first time since 2012, the year Meta went public. The company that bought back about $45 billion of its own stock in 2021 has not repurchased a single share in a year, transitioning rapidly from buying equity back to issuing it at scale.
The financial maneuver includes several distinct layers of capital acquisition. Meta priced $25 billion of regular stock at $625 per share, below Friday’s close, drawing immense demand. Orders came in at roughly five times the shares on offer, with more than half going to long-term and existing investors, according to Bloomberg reporting. An additional $12.5 billion was raised through preferred stock that pays a 6.5% yield and converts to common stock in 2029. The largest portion—up to $60 billion—consists of a new class of nonvoting stock that the company plans to issue incrementally starting next year. Notably, artificial intelligence chipmaker Nvidia is chipping in $3 billion, binding the chip provider tighter to its customer’s financing structure.
Tax Disputes, Boardroom Deals, and Voting Power
The creation of Meta’s new nonvoting share class originated from a fight over Zuckerberg’s taxes, as detailed in an official filing with the U.S. Securities and Exchange Commission. Zuckerberg informed the board that he planned to leave California ahead of a November 3 vote on a billionaire tax. During a September 9 board dinner, he stated he would list his Palo Alto home within days. Five days later, the board and the CEO struck a deal.
Under the agreement, every shareholder receives a free nonvoting share for each share owned, mirroring the exact structure of the stock Meta is now issuing to raise capital. Regulatory filings indicate that Meta needs to raise hundreds of billions of dollars over several years to sustain its infrastructure build-out. Zuckerberg owns approximately 13% of Meta but maintains control over roughly 61% of the votes; issuing nonvoting equity preserves his voting dominance while diluting economic ownership.
Other technology giants are also feeling the financial strain of the artificial intelligence boom. Amazon and Alphabet each spent more capital than their underlying businesses generated during a quarter this year, forcing both firms to borrow heavily. Meta, however, stands out as the first of the major platform companies to shift a substantial portion of the bill directly onto shareholders.
Diverging Signals Between Stock and Bond Markets
While equity buyers have lined up eagerly for Meta’s offerings, debt markets express a markedly different level of anxiety. The cost of insuring Meta’s corporate debt against default hit a record 127 basis points on Friday before easing slightly on Monday while shares slipped. Five-year credit default swaps imply nearly a 10% probability of default over a five-year horizon, up from roughly 4% a year prior, according to data compiled by Yahoo Finance.
This caution echoes wider credit market trends. Riskier junk bonds now pay nearly 8 percentage points more than slightly safer ones, based on BTIG figures highlighted by The Market Ear.
As Alphabet, Microsoft, and Amazon prepare to release their quarterly earnings reports, Wall Street is watching closely to see if other dominant players will continue funding their artificial intelligence ambitions out of pocket or follow Meta’s lead by turning aggressively to public equity and debt markets.
