Under the AI infrastructure investment boom, technology giants have raised enormous amounts of capital through stock offerings one after another. But recent sharp declines in share prices have left investors who participated in these subscriptions sitting on losses. Meta Platforms, Inc. (NASDAQ: META), Alphabet (NASDAQ: GOOGL) and Intel (NASDAQ: INTC) shares continued to fall on Friday, with the offering prices from all three companies' recent share sales now above their secondary market prices.
The selloff began after Alphabet reported earnings on Wednesday, when the company's search and other advertising revenue came in below market expectations. Intel then disclosed supply chain problems in its data center components, with fourth-quarter guidance far below expectations, further denting market sentiment. The performance of both companies highlights market concerns that technology giants are continuously expanding AI investment while commercialization returns have yet to fully materialize.
At a time when large technology companies are raising funds intensively and the market is reassessing AI investment returns, the share price declines have not only caused paper losses for investors who recently joined share offerings, but may also make it harder for tech giants to continue raising capital through equity financing in the future. Meanwhile, the prospect of AI startup Anthropic raising a massive amount through an IPO also faces more uncertainty, with its goal being to match or exceed the record fundraising scale of SpaceX's listing this year.
All Three Tech Giants' Share Offering Subscribers Now Underwater
The recent large-scale stock offerings by Alphabet, Intel and Meta have all encountered market shocks of varying degrees.
Alphabet announced a large-scale equity financing plan in June this year, involving mandatory convertible preferred stock and a plan to gradually sell common stock at market prices. The company subsequently raised the overall financing scale to as much as $85 billion. Among this, Class A and Class C shares were priced at $355.20 and $351.80 respectively.
But as the share price continued to decline, both Alphabet Class A and Class C shares closed on Friday 21% below their offering prices. This means investors who participated in this offering have already suffered relatively large paper losses.
Intel raised approximately $23 billion in August by expanding its stock offering, with an offering price of $95 per share. For most of the period afterward, Intel's share price remained above the offering price. But as AI-related stocks began to weaken this month, Intel's share price fell rapidly, closing on Friday 31% below the offering price.
Meta's situation is similarly unfavorable. The company completed a $25 billion stock offering on Monday this week at $625 per share. After the offering, the share price fell below that level almost immediately. Although it rebounded somewhat afterward, it still closed on Friday 1.6% below the offering price.
It is worth noting that Meta's share price had previously risen sharply after the company released its personal AI agent product Muse around September 8, with a maximum gain of 26% during that period, but all of those gains were subsequently given back.
AI Investment Returns and Financing Pressure Trigger Market Concerns
The market shock to Meta's latest fundraising may not only reflect a repricing of AI investment prospects, but may also be closely related to the timing of the financing.
Luke Lango, chief technology analyst at InvestorPlace, said that given the business progress disclosed by technology companies and their expectations for investment returns, he recognizes the necessity of Meta's fundraising this time. However, against the backdrop of heightened market volatility and negative attention on AI stocks, it may have been more appropriate for underwriting banks to adopt a more conservative pricing strategy.
Bank of America analyst Justin Post previously noted in a client report that investors may be concerned that Meta's capital expenditure scale is expanding and lasting longer than expected, while the company's plan to issue up to $60 billion of common stock at market prices could also create sustained pressure on the share price.
Post believes that if AI investment spending grows faster than commercialization and monetization capacity, Meta's short-term cash flow and profit margins could come under pressure.
For large technology companies, financing needs are still rising. As data centers, chips and AI infrastructure construction continue to advance, companies need to find more sources of funds, and both equity financing and debt financing may become important options.
Microsoft Chief Financial Officer Amy Hood did not rule out the possibility of the company issuing stock in the future during the earnings call on Wednesday. This week, Microsoft also completed a $25 billion bond issuance, with subscription demand exceeding four times the offering size.
Mandeep Singh, global head of technology research at Bloomberg Intelligence, said technology giants clearly need to raise funds by issuing stock and increasing debt if they want to further increase capital expenditure, and both financing methods are currently being used.
Singh further pointed out that if Microsoft wants to further increase capital expenditure next year, it may turn to the equity market for financing.
For the AI infrastructure investment boom, the core question currently facing the market has shifted to whether massive investment can be converted into sustained revenue growth and investment returns. The recent post-offering share price performance of the three technology giants also serves as a warning for future fundraising by large technology companies.
S&P Downgrades Meta's Rating Outlook, AI Spending May Keep Cash Flow Under Pressure
Uncertainty over AI investment returns has also begun to attract the attention of rating agencies. S&P Global Ratings on Friday changed Meta's rating outlook from stable to negative, citing significant uncertainty over the company's capital expenditure and free operating cash flow (FOCF).
S&P noted that Meta's ability to convert AI investment into commercial revenue is weaker than that of some peers, and it remains unclear how long future capital expenditure will stay at high levels. S&P believes that Meta's free operating cash flow may remain negative after 2028, and the company is expected to rely entirely on debt financing to cover its free operating cash flow shortfall in 2028.
S&P also said that given the lack of sufficient transparency in Meta's future capital expenditure plans and the company's ambitious multi-year AI investment plan, it is still difficult to determine whether it can reduce spending as expected. S&P expects Meta's adjusted leverage ratio could rise above 1.0 times as early as 2027, touching the downgrade threshold for its current "AA-" issuer credit rating on Meta.
This adjustment further highlights the financial pressure Meta faces in expanding AI infrastructure investment. As capital expenditure continues to grow, the market's focus is not only on when the AI business can generate enough revenue, but also on whether the company can control its cash flow gap and debt burden while maintaining the scale of investment.
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