S&P lowers Meta's credit outlook to 'negative': 'AI monetization more limited than peers'

[Financial News]  

International credit rating agency Standard & Poor's (S&P) maintained Meta Platforms' credit rating at 'AA-' on the 30th of last month (local time) while lowering its outlook to 'negative.' This means the rating is unchanged for now, but could be downgraded in the future. If the credit rating is downgraded, the massive cost of raising the funds needed for AI investment will snowball.
According to Yahoo Finance, S&P Global Ratings lowered Meta's credit outlook from 'stable' to 'negative,' saying uncertainties related to high capital expenditures and negative free cash flow (FCF) were behind the negative outlook. In particular, it assessed that "Meta's ability to monetize its AI investments is more limited than that of its competitors."
S&P emphasized that Meta's competitors are already generating returns on their data center investments by renting computing capacity to third parties, including cutting-edge model labs and enterprise customers.
It also took a pessimistic view, expecting Meta to continue posting negative FCF not only this year but through 2028. It revised its forecast for Meta to turn FCF-positive in 2028.
Meta's stock briefly rallied as its AI agent Muse made a splash in the market, but later weakened. Last October, its shares plunged more than 15% over the month, marking their worst month in four years. Its advertising business is growing rapidly, but AI spending is rising even faster, heightening investor concerns.

[email protected] Song Kyung-jae Reporter