AI infrastructure “burns money” and continues to eat away at credit! Meta (META.US) credit risk index set a new record, and Microsoft, Oracle, and Broadcom CDS heated up simultaneously

The Zhitong Finance App learned that on Thursday, Meta Platforms Inc. (META.US)'s credit risk index soared to a new all-time high, and corporate bonds weakened at the same time because the company's plans to expand capital spending have once again raised market concerns: in an already saturated market, tech giants will issue more debt for AI construction.

According to ICE Data Services, the five-year credit default swap price of the company's debt once rose 8.9 basis points to about 119.3 basis points per year. Credit default swap prices have risen as investors' concerns have intensified. This is the highest intraday level since the swap began active trading about a year ago. Debt protection costs associated with other hyperscale cloud vendors and chip makers also rose on Thursday, including credit default swaps linked to Oracle (ORCL.US), Microsoft (MSFT.US), and Broadcom (AVGO.US).

Meta said it has agreed to spend about $825 billion on various leases and contracts in the future, many of which are related to artificial intelligence computing power and infrastructure. In July of this year, Meta announced future spending promises close to $700 billion.

The company also raised the lower limit of its capital expenditure forecast for this year from the previous range of 130 billion to 145 billion US dollars to 135 billion US dollars to 145 billion US dollars. The company did not provide capital expenditure guidance for next year.

Meanwhile, free cash flow for the quarter turned negative, at a negative value of $2.12 billion. According to company presentations, the second quarter was positive $784 million, and the third quarter of last year was positive $10.625 million.

In addition to rising credit default swap prices, the company's bonds weakened relative to US Treasury bonds. According to Trace data, the risk premium for its 5.25% coupon bonds due in 2036 increased by 0.06 percentage points, or 6 basis points, to 1.2 percentage points.