Amid the boom in infrastructure investment represented by AI, technology giants have successively raised huge amounts of funds through stock offerings. However, recent significant declines in stock prices have left investors who participated in these subscriptions facing losses. On Friday, the stock prices of Meta, Alphabet, and Intel continued to fall, with the issue prices of their recent offerings all exceeding the secondary market prices.

This round of selling started after Alphabet announced its financial results on Wednesday, when the company's search and other channel advertising revenues fell short of market expectations. Subsequently, Intel disclosed issues with its data center component supply chain, and its fourth-quarter performance guidance was far below expectations, further dampening market sentiment. The performances of these two companies highlight market concerns that tech giants continue to expand their AI investments, but the commercial returns have not yet been fully realized.

At a time when large technology companies are intensively raising funds and the market is re-evaluating the investment returns of AI, declining stock prices not only cause recent investors in these offerings to suffer paper losses but may also increase the difficulty for tech giants to continue raising capital through equity financing in the future. Meanwhile, the prospects for AI startups like Anthropic to raise substantial funds through IPO also face more uncertainties, with the goal of reaching or exceeding the record amount of capital raised during their SpaceX initial public offerings this year.

All subscribers to the additional shares issued by the three major tech giants have suffered losses.

The recent large-scale stock offerings by Alphabet, Intel, and Meta have all encountered varying degrees of market impact.

Alphabet announced a large-scale equity financing plan in June this year, which involved the issuance of mandatory convertible preferred stock and a plan to gradually sell common stock at market price. Subsequently, the company raised the total financing amount to a maximum of $85 billion. The issue prices for Class A and Class C shares were $355.20 and $351.80 respectively.

However, as stock prices continued to fall, Alphabet A class stocks and Class C stocks both closed on Friday at a 21% discount from their issue prices. This means that investors who participated in this issuance have already suffered significant paper losses.

In August, Intel raised approximately $23 billion by expanding the scale of its stock issuance, with an issue price of $95 per share. For most of the time thereafter, Intel's stock price remained above the issue price. However, as the performance of AI concept stocks began to weaken this month, Intel's stock price quickly fell, closing on Friday 31% below the issue price.

The situation with Meta is also not optimistic. The company completed a $25 billion stock issuance on Monday this week, with an issue price of $625 per share. After the issuance, the stock price almost immediately fell below this level, and although there was a rebound later on, it still closed at 1.6% below the issue price on Friday.

It is worth noting that the stock price of Meta had previously seen a significant increase around September 8th due to the company's release of the personal AI intelligent entity product Muse, with the maximum increase reaching 26%. However, all of that gains were later lost.

AI Investment returns and financing pressures trigger market concerns

The market impact of this financing by Meta may not only be a revaluation of the investment prospects for AI, but it is also closely related to the timing of the financing.

InvestorPlace, the Chief Technical Analyst, stated that considering the business progress disclosed by tech companies and their expectations for investment returns, he acknowledges the necessity of Meta's current financing. However, in the context of increased market volatility and AI stocks attracting negative attention, it may be more appropriate for the underwriting banks to adopt a more conservative pricing strategy.

Bank of America analyst Justin Post previously pointed out in a client report that investors may be concerned about the expansion of Meta's capital expenditure on a larger scale and for a longer duration than expected. At the same time, the company's plan to issue common stock at market value for up to $60 billion could also put continuous pressure on the stock price.

Post believes that if the growth rate of AI's investment expenditures exceeds its commercialization and monetization capabilities, Meta's short-term cash flow and profit margins may face pressure.

For large technology companies, the demand for financing continues to rise. As the construction of data centers, chips, and AI infrastructure progresses, companies need to find more sources of funding, 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 shares in the future during the earnings conference call on Wednesday. Just this week, Microsoft also completed a $25 billion bond issuance, with subscription demand exceeding four times the issuance amount.

Bloomberg Intelligence, the global technology research director, stated that tech giants hope to further increase their capital expenditures. Clearly, they need to raise funds by issuing stocks and increasing debt, and both financing methods are currently being used.

Singh further pointed out that if Microsoft wishes to increase its capital expenditures even further next year, it may turn to the equity market for financing.

For the wave of infrastructure investment represented by AI, the core issue facing the current market is whether such substantial investments can be transformed into sustained revenue growth and investment returns. The recent stock performance of three tech giants after their additional share offerings also serves as a warning for future financing efforts by large technology companies.

S&P downgrades rating outlook for Meta; AI expenditures may continue to put pressure on cash flow

The uncertainty of investment returns has also begun to attract the attention of rating agencies. Standard & Poor's Global Ratings (S&P) adjusted its rating outlook for Meta from stable to negative on Friday, citing significant uncertainties regarding the company's capital expenditures and free cash flow.

S&P pointed out that Meta's ability to convert AI investments into commercial revenue is inferior to that of some of its peers, and it is still unclear how long future capital expenditures will remain high. 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 the free operating cash flow shortfall in 2028.

S&P also stated that, given the lack of sufficient transparency in Meta's future capital expenditure plans, and considering that the company has set ambitious multi-year AI investment plans, it is currently difficult to determine whether they will be able to cut expenditures as expected. S&P expects that Meta's adjusted leverage ratio may rise above 1.0 as early as 2027, which could trigger their downgrade of Meta's current "AA-" issuer credit rating.

This adjustment further highlights the financial pressures faced by Meta in expanding infrastructure investments in AI. As capital expenditure continues to grow, the market's focus is not only on when the AI business will be able to generate sufficient revenue, but also on whether the company can control cash flow gaps and debt burdens while maintaining the level of investment.