S&P Global Ratings just downgraded Meta's credit outlook from stable to negative, and the reason ought to worry every American with a dime in the market: Mark Zuckerberg is torching cash on AI faster than he can explain how it makes money.
The credit agency flagged Meta's ballooning capital expenditures and its first negative free cash flow quarter as signs that the company's AI spending binge may not pay off. Meta bled $2.12 billion in free cash flow in the third quarter — going into the red for the first time. Full-year capex is now expected to land between $135 billion and $145 billion, and the company has $825 billion in commitments stacked up. S&P expects Meta's leverage — debt measured against earnings — to rocket above 1.0x as soon as 2027, up from roughly 0.1x last year. That would breach the limit for its current AA- rating.
The core problem S&P identified is simple: Meta has no cloud business. Amazon, Microsoft, and Google can rent out computing power to offset their AI build-out costs. Meta can't. "Meta's ability to monetize its AI investments is more limited than that of its peers," S&P said bluntly. As TNW reported, Zuckerberg himself admitted Meta bet $200 billion on AI without knowing whether it would work.
Meta spokesperson Kamran Mumtaz pushed back: "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities. We see significant product and business opportunities ahead of us, supporting our very strong credit profile."
The market isn't buying it. Investors sent Meta shares down 7% after last week's earnings report — even though the company beat on revenue — and the stock finished October down 15%, its worst month in four years, according to CNBC.
Now Meta is scrambling to fund the build-out. The company announced plans to raise $95 billion: $35 billion through an underwritten public equity offering, followed by another $60 billion via an at-the-market program. That is a staggering sum of shareholder dilution to bankroll a bet that S&P says may be slow to return a dime.
Here is the question neither outlet pressed hard enough: what is all this AI spending actually for? Meta's business model is advertising and engagement — which means the AI it's building serves advertisers and content moderation, not the people using the platform. Billions are being incinerated on technology designed to sell you things and police what you say. S&P's downgrade is a warning about the balance sheet, but it's also a signal that the AI bubble — inflated by hype and propped up by companies with more cash than accountability — is starting to show cracks.
The open question: does Zuckerberg pivot, or does he keep doubling down on a $200 billion bet he already admitted he can't guarantee?
