Meta plans $95bn stock offering to help cover AI expansion

Mark Zuckerberg’s Meta has announced plans for a $95bn (£71bn) fundraising to cover its AI expenditure, even as Elon Musk warned that funding for smaller players in the sector was drying up.

The owner of Facebook, Instagram and WhatsApp is a leading investor in AI and is ploughing multibillion-dollar sums into datacentres, the central nervous systems of the technology.

Meta’s announcement on Monday came after Musk added to the pressure on “neocloud” datacentre providers – which lease out computing power to AI companies – by saying the sector faced “death and consolidation” amid concerns over the sustainability of their funding.

The Meta fundraising will come in two parts. In the first, the company plans to raise $35bn through new “underwritten public offerings” – a sale of company stock. This offering has some big name backers, with chipmakers Nvidia, AMD and Broadcom all showing interest in taking part, Meta said. These “cornerstone investors” could buy up to $5bn of the stock on offer.

In the second, Meta also plans to launch a $60bn “at-the-market offering” in which it will sell new common stock to investors at the going market rate in future. That offering involves selling Meta’s new class C stock, which it announced it was creating last week. These class C shares do not have voting rights, so can be sold without diluting Zuckerberg’s control of the company.

The Silicon Valley companies said these plans would support “Meta’s continued investment in AI infrastructure and personal super intelligence”.

Shares in Meta rose in premarket trading on the news. However, other companies in the AI sector found themselves under further pressure on Monday.

Shares in Nebius, CoreWeave and Iren dropped more than 2% in premarket trading on Monday after Musk said more than 200 neocloud firms were in trouble, although they later rose after trading began.

“As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers,” the world’s richest person wrote in a post on X on Sunday.

Drawing an analogy with the survival prospects of the guppy fish – which has a reputation for struggling to thrive in domestic fish tanks – Musk added: “That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.”

The chief executive and largest shareholder of Tesla and SpaceX – which also owns and operates datacentres – was responding to a post by the venture capitalist Chamath Palihapitiya, who had written on the Musk-owned platform that neoclouds were “disorganized and poorly capitalized”.

Fears over the financial stability of neocloud businesses are focused on their high levels of borrowing – approximately $35bn at CoreWeave, for example – and whether the AI market will grow fast enough to service it.

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Neil Wilson, an analyst at the investment platform Saxo UK, said the differing market reactions showed investors were more willing to support the AI investment plans of financially robust companies.

“Meta’s not going to struggle to service debts and can lean on equity raises to minimise debt, too. This is kind of exactly the point Musk made about SpaceX having all its earnings and is investment grade, which the neoclouds don’t have,” he said.

SpaceX reported on Monday that it had entered a $40bn deal with Apollo Global Management to lease chips to power AI datacentres.

CoreWeave’s chief executive, Michael Intrator, reportedly sent an internal memo to employees saying that some investors had not understood the $30bn company. The company’s stock has declined in value by more than a third over the past month.

“When you are building a new type of technology company, there will be periods of time when the market misunderstands and acts irrationally,” he wrote, according to Bloomberg.