S&P Just Flipped Meta's Credit Outlook to Negative Over Its AI Spending

S&P Global Ratings lowered the outlook on Meta Platforms' AA- credit rating to negative, pointing to rising leverage and doubt about how long the company's heavy capital spending and negative free operating cash flow can keep running. The rating firm said Meta has less visibility into AI monetization than some of its peers, and questioned when the new AI investments will start generating revenue that clearly outpaces their cost. S&P also expects Meta's capital expenditures to hit about $140 billion in 2026 and climb above $225 billion in 2027, with leverage potentially topping 1.0 times next year — up from roughly 0.1 times last year.

Meta isn't taking the call lying down. Spokesperson Kamran Mumtaz told Bloomberg on Friday that the company sees significant product and business opportunities ahead and believes its credit profile remains very strong. The pushback lands alongside a hefty tab: Meta has disclosed more than $800 billion in future spending commitments, with nearly half tied to leases that haven't even started yet, mostly for data centers and energy infrastructure. CFO Susan Li has said Meta plans to keep investing aggressively across its core business and emerging AI efforts.

The funding side is where things get messy. Meta recently wrapped a $25 billion stock sale at $625 per share and still has an at-the-market program that could unload up to another $60 billion in stock. On Friday, shares slipped below that $625 offering price — never a comfortable look when dilution and funding needs are already front of mind. Meta has also given back the gains it scored after September's launch of Muse, its personal AI agent, according to Bloomberg.

Meta is hunting for ways to turn AI into actual money, weighing subscriptions, transaction fees and potentially advertising around Muse and other AI products. It's also exploring a possible cloud business that would sell access to AI models or raw computing capacity — a page straight out of the hyperscaler playbook.

Some big holders have already trimmed their exposure. Blue Line Capital founder and president Bill Baruch said he cut Meta down to 1.5% of his portfolio from 2.5%, telling CNBC last Wednesday that the capital-spending outlook has become a major headwind. He flagged expected 2026 capex of $135 billion to $145 billion, estimates approaching $200 billion for 2027, negative free cash flow, and a stock that couldn't hold momentum after the Muse launch and earnings. Baruch said his firm is raising cash for flexibility, and Meta was one position on the chopping block.

Ritholtz Wealth Management CEO Josh Brown also turned more cautious on the intermediate term, pulling Meta off his “Best Stocks in the Market” list. He told CNBC on Tuesday he wouldn't buy back in unless the stock reclaims its 50-day moving average near $664, saying Meta may still work as a long-term hold but that he sees too many stronger names to wait around on a rebound. Meta shares were up 0.61% at $618.77 on Monday, according to Benzinga Pro data.