Meta completes $30B bond deal amid AI investment surge

Meta Platforms priced $30 billion of senior notes in six parts for general liquidity on October 30. This marks the largest bond offering since 2023, when Pfizer issued $31 billion in M&A bonds, and follows Oracle's $18 billion bond issuance in September, which has since struggled in secondary trading.

Meta's deal is tied for the fifth-largest high-grade bond offering on record. Larger offerings include Verizon ($49 billion in 2013), Anheuser-Busch InBev ($46 billion in 2016), and CVS Health ($40 billion in 2018), all of which supported major acquisitions. Other $30 billion offerings, such as those from Magallanes and AbbVie, also backed M&A activity.

The consensus among companies is that making AI profitable will require significant investment. Meta, whose core business includes Facebook, Instagram, Messenger, and WhatsApp, did not allocate the bond proceeds to a specific purpose. However, management has indicated plans to ramp up AI investment to capitalize on future breakthroughs.

Oracle's Larry Ellison recently stated that AI is fundamentally transforming Oracle and the broader computer industry, warning that many may not fully grasp the scale of the changes ahead.

Meta CEO Mark Zuckerberg, on an October 29 call with analysts, described "superintelligence for everyone" as the company's end goal. He noted that industry timelines for achieving AI objectives range from a few years to as long as seven years or more. Zuckerberg argued that aggressively building capacity now is the right strategy to be prepared for the most optimistic scenarios. If progress takes longer, the additional compute resources can be used to accelerate Meta's core business. He also mentioned that the company could slow down and "grow into what we build" if necessary.

Meta's AA-/Aa3 ratings remain on stable outlooks, but costs are rising as analysts consider the prospects for near-term returns. Meta's $3.25 billion issue of 5.40% 2054 bonds recently traded at T+94, which was 10 basis points wider on the day and 20 basis points wider in October. These notes were priced at T+115 in August 2024 as part of a $10.5 billion placement for general liquidity.

Investor sentiment has become more cautious following Oracle's $18 billion bond deal, as early Cloud AI business margins were thinner than expected. Oracle's deal, which included $3.5 billion of 5.95% 30-year bonds at T+125, saw strong demand with order books more than four times the offering amount. Meta's deal reportedly attracted a similarly strong order book. By October 30, Oracle's 2055 bonds widened to T+158, marking the widest spread yet.

Meta's $30 billion bond deal includes:

• ​$4 billion of 4.20% five-year notes at T+50
• ​$4 billion of 4.60% seven-year notes at T+70
• ​$6.5 billion of 4.875% 10-year notes at T+78
• ​$4.5 billion of 5.50% 20-year bonds at T+88
• ​$6.5 billion of 5.625% 30-year bonds at T+98
• ​$4.5 billion of 5.75% 40-year bonds at T+110

Last year's deal came at lower coupons but wider spreads, with pricing at T+70 for 4.55% seven-year notes, T+80 for 4.75% 10-year notes, and T+130 for 5.55% 40-year bonds.