Meta gets US$96 billion of orders for latest jumbo bond sale

A car passes Facebook's new Meta logo on a sign at the company headquarters on Oct. 28, 2021, in Menlo Park, Calif. Photo by AP Photo/Tony Avelar

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Investors placed about US$96 billion of orders for Meta Platforms Inc.’s bond sale, according to people with knowledge of the transaction, as the Facebook parent boosts spending on infrastructure for the artificial intelligence boom.

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The company launched a US$25 billion sale of investment-grade note on Thursday, said one person, who also asked not to be identified because they aren’t authorized to speak on the matter. For Meta’s prior deal in October, the company attracted a then-record US$125 billion of orders for what was US$30 billion of supply.

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As in that offering, Thursday’s deal is in six parts. The longest-tenored security, maturing in 2066, is set to yield 1.47 percentage point above Treasuries, compared with initial price talk of as much as 1.8 percentage point, the person said.

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Citigroup Inc. and Morgan Stanley are managing the deal — one of 12 in the market. Citi declined to comment about the amount of orders while Morgan Stanley and Meta didn’t immediately respond to comment requests.

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Big tech companies are borrowing heavily as they compete for dominance in artificial intelligence. Investors have readily absorbed the supply of bonds from these companies — even during bouts of volatility tied to the conflict in Iran — underscoring relentless demand for exposure to the artificial intelligence boom.

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But investors are also showing some signs of fatigue after some US$300 billion of various types of AI debt has been sold already, including project finance debt and unsecured notes from hyperscalers. Money managers are increasingly demanding higher risk premiums and more protections.

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Meta’s 40-year bond sold in October had a 1.1-percentage-point spread to Treasuries, a spread that’s nearly 0.4 percentage point tighter than Thursday’s equivalent security.

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The company’s shares plunged by the most in six months on Thursday amid fears that Meta’s investment in AI won’t pay off. Costs to insure debt against default hit a fresh record high.

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“With the equity lower after earnings, they probably sweeten the yield on the sale today so the deal not only clears but also trades well — setting them up nicely for future issuances,” said Grant Nachman, founder and chief investment officer of Shorecliff Asset Management Co.

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The debt sale comes a day after Meta posted better-than-expected revenue for the first quarter and raised projected 2026 capital expenditures to as much as US$145 billion. Other hyperscalers also posted results on Wednesday, and the four biggest firms are now planning to spend as much as US$725 billion this year on AI data centre equipment and other capital.

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Chief executive Mark Zuckerberg has said Meta will spend hundreds of billions of dollars on AI infrastructure by the end of the decade, and that was before a memory chip shortage triggered a surge in prices. The company has announced billion-dollar deals with Nvidia Corp., Advanced Micro Devices Inc. and Broadcom Inc. for chips and other hardware in 2026 and is building several massive data centres to power its efforts.