Meta to raise $30 billion in its biggest bond sale as AI expansion costs rack up

Oct 30 (Reuters) - Social media giant Meta Platforms (META) will raise up to $30 billion in its biggest bond offering ever, it said in a filing on Thursday, as Big Tech rushes to fund the costly expansion of artificial intelligence infrastructure.

Meta, navigating a period of intense investments in AI that is creating significant cost pressures, has flagged that its capital expenditure next year would be "notably larger" than in 2025.

The company's shares closed down more than 11% on Thursday, as investors mulled a 32% increase in costs outpacing a 26% revenue jump.

It is raising the funds through a six-part bond sale with maturities ranging from five to 40 years. Meta last tapped the bond market in 2022 with a $10 billion sale.

The principal amounts for the bonds range from $4 billion to $6.5 billion and co-managers for the sale include Morgan Stanley, Allen & Company and Blaylock Van, among others.

HEFTY INVESTMENT IN AI EXPANSION

Last week, Meta struck a $27 billion financing deal with Blue Owl Capital, Meta's largest-ever private capital agreement, to fund its biggest data center project in Richland Parish, Louisiana, known as "Hyperion."

Major tech companies, including Alphabet, Amazon.com (AMZN), Meta, Microsoft (MSFT) and CoreWeave (CRWV) , are on track to spend $400 billion on AI infrastructure this year, Morgan Stanley estimates.

Meta is also investing heavily to attract and retain top AI researchers and engineers as a talent war between tech firms intensifies.

For the company's new and ambitious AI goals, CEO Mark Zuckerberg personally led an aggressive talent hiring spree for its recently reorganized AI unit: Superintelligence Labs.

Employee compensation costs will be the second-largest contributor to the increase in costs next year, particularly AI talent, Meta CFO Susan Li said.

Meta has also boosted the lower end of its capital expenditure outlook to between $70 billion and $72 billion this year, compared with its prior forecast of $66 billion to $72 billion.

Fixed-income news service IFR and Bloomberg first reported details of the bond sale earlier on Thursday.

Reports of the Meta bond sale had spurred selling of U.S. Treasuries for hedging purposes. Investors have flocked to large new corporate bond issues amid wider uncertainty in equity markets. (Reporting by Dagmarah Mackos, Anna Peverieri and Kanjyik Ghosh in Barcelona, and Jaspreet Singh and Arsheeya Bajwa in Bengaluru; Editing by Tomasz Janowski, Jan Harvey, Jane Merriman and Alan Barona)