Meta Platforms META shares gained more than 2% on Tuesday as the company attracted strong investor demand for its latest bond offering, despite growing concerns about the cost of Big Tech's artificial intelligence investments.
Investors placed orders worth as much as $58 billion for Meta's US dollar bond offering, which is expected to raise at least $15 billion, Bloomberg News reported, citing people familiar with the matter.
The order book was roughly four times the size of the proposed offering, compared with an average peak order-book ratio of 3.8 times for major US dollar technology bond deals this year.
The dollar offering forms the largest part of a broader fundraising effort expected to reach at least $20 billion. Meta is also preparing its first euro-denominated bond sale, which could begin as soon as Wednesday.
Meta offers higher yields to attract bond investors
The latest transaction marks Meta's first high-grade bond offering since April, when it raised $25 billion.
That deal attracted peak investor demand of $96 billion.
However, the company is now having to offer more attractive borrowing terms to secure demand.
Pricing on its longest-dated notes, due in 2056, tightened from initial discussions to a yield premium of 2.2 percentage points above US Treasuries.
Despite the improvement, the premium remains almost 0.9 percentage points wider than that offered on a comparable Meta bond in April.
The proposed dollar bonds have maturities ranging from five to 30 years, while the euro-denominated notes are expected to include maturities extending to nearly 38 years.
Citigroup and Morgan Stanley are leading the offering.
The wider borrowing costs reflect a shift in investor sentiment towards major technology companies.
Big Tech bonds are trading at their largest yield premium to other investment-grade debt since 2003, while the cost of protecting several US technology companies against default has approached record levels.
AI spending drives borrowing across Big Tech
Meta's fundraising comes amid a broader wave of debt issuance by companies investing heavily in artificial intelligence infrastructure.
Oracle (ORCL) raised $20 billion through a bond sale on Monday, while Alphabet (GOOGL) secured €6 billion through a euro-denominated offering.
Microsoft (MSFT) also returned to the US investment-grade bond market last week with a $25 billion transaction.
These companies are raising capital to finance data centres, advanced semiconductors and other infrastructure required to support AI development.
A group of hyperscalers and so-called neocloud companies tracked by Bloomberg Intelligence is expected to invest nearly $4.5 trillion over the next three years.
Meta alone is forecast to spend more than $740 billion over the period.
The scale of these commitments has increased investor scrutiny of whether the companies can generate sufficient returns from their AI investments.
Meta combines debt and equity to fund AI ambitions
Alongside its debt offering, Meta has been raising capital through equity markets to support its spending plans.
The company last week priced $25 billion in common stock and raised another $12.5 billion through an offering of preferred shares.
It has also outlined plans to raise as much as $60 billion through an at-the-market share sale programme.
Meta's financing efforts come as it expands its AI capabilities.
The company recently launched Muse Wonder, a new AI model that its leadership described as having frontier capabilities comparable to OpenAI's ChatGPT and Anthropic's Claude in coding and handling financial or legal questions.
However, the growing financing requirements have raised concerns about the company's balance sheet.
S&P Global Ratings cut its outlook on Meta last week, citing pressure from elevated AI spending.
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