Meta Debt Insurance Costs Hit Record High After AI Spending
Meta Platforms saw its debt insurance costs reach an all-time high as investors reacted to increased AI spending and the company's first negative cash flow since 2012.
Meta Platforms experienced a record surge in the cost of insuring its debt against default on Thursday. The spike followed the company's decision to raise the lower end of its annual capital expenditure forecast to between $135 billion and $145 billion to fund artificial intelligence development.
Investors reacted negatively to the spending plans, the introduction of new non-voting shares, and a third-quarter free cash flow deficit of $2.12 billion. This deficit marks the first time the company has reported negative cash flow since 2012. Consequently, Meta's share price dropped 6.1 per cent.
The selloff triggered a broader market decline among AI-related firms. CoreWeave, Nebius Group, and hyperscalers including Oracle, Alphabet, Microsoft, and Amazon all saw losses. The Philadelphia Semiconductor Index erased over $688 billion in market value as investors questioned the potential returns on massive AI investments in an environment of rising borrowing costs.
