S&P Flags Meta’s AI‑Heavy Spending as Credit Risk, Shifts Outlook to Negative

S&P Global Ratings shifted Meta's credit outlook to negative on Friday, citing worries over its soaring capital spending and dwindling free cash flow. The agency cut the social‑media giant's rating from AA‑ stable to AA‑ negative, a step away from its top‑tier AAA rating. S&P said the outlook reflects uncertainty around Meta's elevated capex and its negative free cash flow. The rating firm questioned Meta's ability to monetize its AI investments, noting that peers also face cash‑flow strain from costly data‑center buildouts. Meta recently launched its Muse AI agent app and related foundation models, but S&P warned that revenue from these products may not outweigh rising costs for several years. A Meta spokesperson disagreed, stating the company sees significant product and business opportunities that support a very strong credit profile. In its third‑quarter earnings report, Meta forecast full‑year capital expenditure between $135 billion and $145 billion and recorded a negative free‑cash flow of $2.12 billion, the first red figure in its history. Investors reacted by sending the shares down 7% after the earnings release, even though revenue beat expectations. The stock ended October 15% lower, marking its worst month in four years. To fund its AI push, Meta plans to raise $95 billion, starting with $35 billion in underwritten public equity and a further $60 billion through an at‑the‑market program. S&P expects Meta's capex growth to flatten beginning in 2028 but remains less certain that spending will be curtailed as previously anticipated. Meta’s spokesperson added that the technology and infrastructure being built now will open new revenue streams, create long‑term shareholder value, and move the company toward delivering personal superintelligence to everyone.

Context

Capital expenditure, or capex, is the money a company spends on long‑term assets such as data centers. Heavy AI spending can strain cash flow, which in turn influences credit ratings and borrowing costs. A negative outlook signals higher risk for investors and may raise the cost of future financing.