S&P Global Ratings lowered Meta’s credit outlook to negative on Friday, October 30, due to heavy AI spending. The agency said, “Meta’s ability to monetise its AI investments is more limited than that of its peers.” Meta disagreed, as the company continues to spend billions on data centres and new infrastructure.
S&P Global Ratings hinted on Friday, October 30, that it could downgrade Meta Platforms' credit rating within two years, as the company’s heavy spending on artificial intelligence (AI) strained its finances.
The agency lowered its outlook on Meta’s AA- credit grade to negative, according to a statement. S&P said the company’s rising leverage, which measures debt against earnings, also drove the decision.
“Meta’s ability to monetise its AI investments is more limited than that of its peers,” S&P said.
The agency added that it was unclear when the spending would produce enough revenue to cover rising costs. The outlook “reflects uncertainty around how long capex will remain elevated and free operating cash flow will be negative,” it said.
A negative outlook does not mean a downgrade is under way, but it signals that S&P could cut the rating within the next couple of years, but is not actively considering one now, according to a Bloomberg report.
The move came as investors seemed to question whether Meta and other technology giants could earn real returns from their huge AI building programmes.
The Nasdaq 100 index fell 3.5% on Friday, briefly entering correction territory, after disappointing tech earnings.
Meta’s AA- rating is the fourth-highest investment-grade score, so even a one-notch downgrade would leave it firmly in high-grade territory. Still, S&P forecast that Meta’s capex, meaning spending on long-term assets such as data centres, would reach $140 billion this year and exceed $225 billion in 2027.
It said leverage could climb above 1.0 times as soon as next year, from about 0.1 times last year.
Meta, however, disagreed with the assessment. “We respectfully disagree with S&P’s assertion about Meta’s AI monetisation capabilities,” spokesperson Kamran Mumtaz said in a statement. “We see significant product and business opportunities ahead of us, supporting our very strong credit profile.”
Earlier this month, Meta disclosed more than $800 billion in future spending commitments, almost half of them tied to leases that had not yet begun, largely for data centres and energy infrastructure.
According to a Bloomberg report, Chief Financial Officer Susan Li told analysts: “We expect to continue investing aggressively to support both our core business and emerging AI initiatives.”