Meta Platforms Raises $10.5 Billion in Record Bond Sale to Fund AI Investments

Meta Platforms Inc., the parent company of Facebook and Instagram, has completed its largest-ever debt sale, raising $10.5 billion through the issuance of investment-grade bonds. The funds are set to bolster Meta's cash reserves as the company intensifies its investment in artificial intelligence (AI).

The bond offering, which was conducted in five parts, includes a 40-year security yielding 1.3 percentage points above Treasuries. This yield was lower than the initial guidance of 1.55 percentage points, reflecting strong demand from investors. The details of the sale were disclosed by a person familiar with the matter, who requested anonymity due to the private nature of the transaction.

"Meta's sale is a sign that their investment in AI is not slowing down and is likely to increase over the next couple of years," said Robert Schiffman, an analyst at Bloomberg Intelligence. "Meta has an ample amount of cash, but it's a more efficient use of capital to borrow money in the bond market."

This bond sale marks Meta’s third major foray into the high-grade bond market. The company made its debut in 2022 with a $10 billion issuance, followed by an $8.5 billion sale last year. The current deal, totaling $10.5 billion, is the largest high-grade bond sale Meta has ever undertaken, according to data compiled by Bloomberg.

The move comes as several tech giants, buoyed by investor enthusiasm surrounding AI, have seen their stock prices soar. However, recent global market volatility has pressured some of these high-flying firms, leading investors to seek more tangible progress on AI technologies. Meta has managed to buck this trend, with its shares surging after the release of stronger-than-expected second-quarter results, driven by the success of its targeted ad sales.

Issuing bonds now provides Meta with increased financial flexibility, even as the company holds substantial cash reserves. As of June 30, Meta had $58.1 billion in cash, cash equivalents, and short-term investments. Despite this, Schiffman noted that the company has been "under-levered" and has discussed raising its debt levels to support continued investment in AI and the metaverse.

Meta's AI ambitions have led to significant spending on data centers and computing infrastructure, as CEO Mark Zuckerberg aims to position the company as a leader in the AI space. Last week, Meta raised the low end of its 2024 capital-spending projections, now estimating a range of $37 billion to $40 billion.

Meta was one of 17 companies in the market on Wednesday with investment-grade bond offerings. Blue-chip firms returned to the primary bond market after a brief hiatus at the start of the week due to global stock market declines. As market conditions stabilized, the average high-grade bond yield settled at 5.06%, making funding more attractive.

The bond sale was managed by major financial institutions, including Bank of America Corp., JPMorgan Chase & Co., and Morgan Stanley.Meta's strategic move to raise capital through this record bond sale underscores the company's commitment to advancing its AI capabilities and maintaining its competitive edge in the rapidly evolving tech landscape.