Meta issues $25 billion in bonds as market enthusiasm for subscriptions cools.

Meta issues $25 billion in investment-grade bonds again, but this time, the market’s enthusiasm has clearly cooled. According to Bloomberg, this is Meta's second hundred-billion-level bond issuance in six months, but the company now faces higher pricing pressure. The bond spreads for almost all maturities have widened compared to October last year, and the peak order size has fallen from about $125 billion last time to $96 billion. Meanwhile, after the earnings report, the company’s share price saw its biggest single-day drop in six months, and the cost of credit derivatives used to hedge its default risk hit a historic high on Thursday. These signals reflect investors’ growing concerns about the return on Meta’s AI investments. CEO Mark Zuckerberg has raised capital expenditure expectations for 2026 to a maximum of $145 billion and declared full confidence in the continued ramp-up of AI infrastructure, but has failed to provide the market with a clear monetization path. Pricing under pressure, investors demand higher compensation The longest-term bond issued this time, maturing in 2066, was priced at a spread of 147 basis points over U.S. Treasuries—narrowed from the initial guidance’s maximum of 180 basis points, but still much higher than the 110 basis point spread on Meta’s 40-year bond issued last October. Of the six different maturities, almost all were priced with wider spreads than last time, indicating that investors are seeking more risk compensation. The shrinking order size also confirms the change in market sentiment—the previous issuance reached $30 billion, with much more enthusiastic participation. Zach Griffiths, head of investment-grade and macro strategy at CreditSights, said, “We expect that the large-scale, concentrated supply of tech bonds will continuously pressure spreads to widen.” In April, $177.5 billion of investment-grade bonds were issued in the U.S., marking the second busiest month in history. AI arms race drives up borrowing scale Meta’s bond issuance came just one day after its quarterly report, with revenue beating expectations, but the subsequent massive capital expenditure plan weighed on the market. The four major hyperscale cloud providers have a combined capital expenditure plan of $725 billion this year, covering AI data center equipment and other infrastructure investments. Zuckerberg previously stated that Meta would spend hundreds of billions on AI infrastructure by the end of this decade—a statement made before the storage chip shortage sent prices soaring. The company has signed multi-billion-dollar chip and hardware procurement agreements with Nvidia, Advanced Micro Devices, and Broadcom, and is building several large data centers. Monetization path unclear, market confidence discounted Although Zuckerberg expressed strong confidence in AI investments during the analyst conference call, his explanation of the profit model disappointed investors. He admitted, “Meta does not have a 'very precise plan' for developing various AI products,” and stated, “I think we have a general sense of where things need to go,” while acknowledging these answers might make people "feel unsatisfied." These remarks directly triggered a drop in stock price—the biggest in nearly six months. Even so, AI bonds led by large tech companies have generally been absorbed by the market, and demand did not significantly retreat even during the temporary volatility caused by the Iran situation. However, underwriters have had to make a greater effort to complete sales, offering higher compensation and concessions to attract investors. Several investors and strategists said that as tech companies continue large-scale borrowing, the pressure on the pricing and issuance terms of AI-related bonds is expected to intensify further. Risk warning and disclaimer The market has risks; investment requires caution. This article does not constitute personal investment advice and does not take into consideration users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions mentioned here suit their specific circumstances. Making investments based on this article is at your own risk.