Meta Platforms Inc. The issuance of $25 billion in investment-grade bonds was the second very large bond issuance in six months, and at the same time, investors began to show signs of weakness. The bond issuance is divided into six tranches, with almost all pricing risk premiums higher than Meta's October issuance, indicating that investors are demanding higher returns before they are willing to buy the Facebook parent company's bonds.
Investor subscriptions for the company's bonds peaked at $96 billion, down from about $125 billion in the previous $30 billion bond issuance.
There are other signs that concerns about Meta's prospects are growing, with investors worried that the company's investments in artificial intelligence may not pay off.
The company's shares fell the most in six months a day after it reported quarterly results and raised its forecast for capital spending. Meanwhile, the cost of using derivatives to hedge against a default on its debt rose to a record high on Thursday.
Big tech companies are borrowing heavily as they compete for dominance in artificial intelligence. Investors and strategists say the pricing and terms of AI-related debt are likely to come under greater pressure in the future.
A person with direct knowledge of the transaction said that in Meta's bond issuance, the yield of the longest-term bond due in 2066 is 1.47 percentage points higher than that of U.S. Treasuries, while preliminary pricing discussions have been as much as 1.8 percentage points. The spread on Meta's 40-year bond issued last October was 1.1 percentage points.
Even during market volatility related to the Iran conflict, investors have actively absorbed debt supply from technology companies, highlighting that demand for artificial intelligence-related assets remains strong. But after accumulating about $300 billion in debt issuance, banks are having to work harder to sell the bonds, offering more incentives and higher returns to attract investors.
The U.S. investment-grade bond market hit $177.5 billion in issuance in April, the second-highest level for the same period on record, according to data compiled.
The debt issuance occurred the day after Meta reported better-than-expected first-quarter revenue, and the company also raised its capital expenditure forecast for 2026 to as much as $145 billion. Other hyperscale technology companies also reported results on Wednesday, with the Big Four now planning to spend as much as $725 billion this year on artificial intelligence data center equipment and other capital expenditures.