Meta Platforms (META) experienced a sharp decline on Friday, with shares falling 5.6% to $592.29, after a Financial Times report indicated the company might sell tens of billions of dollars in stock to finance its artificial intelligence infrastructure expansion. The news triggered concerns among investors about potential dilution, even as the company continues to post robust advertising revenue.
The timing of the report is notable, coming just days after Alphabet (GOOGL) raised its equity capital plans to $84.75 billion for similar AI infrastructure and computing needs. This has given the market a new benchmark for assessing the costs of the AI arms race among Big Tech firms.
Meta is exploring various equity-raising options, including selling new shares or share-based securities, which would mark a significant shift in how the company raises capital. Reuters reported this week that major technology companies are increasingly turning to debt and equity deals to fund the rapid expansion of AI data centers, with total industry investment expected to exceed $700 billion this year.
According to the Financial Times, Meta executives are considering mandatory convertible preferred shares, a hybrid security that starts as preferred stock and later converts to common shares. Finance chief Susan Li and President Dina Powell McCormick are leading the discussions, though the company has not yet hired banks or committed to any specific transaction.
Meta updated its capital expenditure guidance for 2026 to a range of $125 billion to $145 billion, up from its previous forecast of $115 billion to $135 billion. The company attributed the increase to more expensive components and higher data center spending. In the first quarter, Meta reported revenue of $56.31 billion, a 33% year-over-year increase, and ended the period with $81.18 billion in cash, cash equivalents, and marketable securities.
During an April earnings call, CFO Susan Li emphasized the growing importance of computing power, stating that Meta is "investing aggressively" to enhance infrastructure and secure future capacity through supply-chain deals and cloud agreements. CEO Mark Zuckerberg has framed this spending as part of the company's push into "personal superintelligence," AI agents that work across Meta's apps and devices. In April, he said Meta is "on track to deliver personal superintelligence to billions of people."
The broader tech sector also struggled, with the Nasdaq Composite falling 3.7% on Friday. Alphabet and Amazon (AMZN) also declined, but Meta's drop was more pronounced due to its specific funding concerns and heavy selling in high-priced AI stocks. Meta's advertising business remains strong, with ad impressions up 19% year-over-year and average ad prices rising 12%. The company's operating margin held steady at 41%.
The potential equity sale introduces dilution risk for current shareholders. A large common-stock offering would directly reduce existing investors' stakes, while preferred or convertible offerings could pressure the stock price if market participants perceive weakness in Meta's cash flow or debt profile. Sources indicate that discussions are still at an early stage, and Meta could opt for a smaller deal, issue bonds, pursue a partnership, or ultimately decide against any action.
Investors are now closely watching how Meta will fund its AI ambitions, weighing the potential impact on profits before new AI products can generate meaningful revenue. The market is assessing whether the company's core advertising business, while strong, will require additional capital to sustain growth in the face of escalating AI infrastructure costs.
