Meta slides after announcing stock sales to fund AI build-out

What did Meta announce?

Meta Platforms (Nasdaq: META) announced plans Monday to raise money by selling new stock. The money would help pay for data centers and computing power for artificial intelligence. Its shares slid 1.9% to close at $630.56, losing $27 billion in market value.

Why it matters: The package has several pieces. Meta plans to sell new Class A common stock alongside mandatory convertible preferred shares. These preferred shares are set to turn into common stock around Aug. 15, 2029, under their terms.

Meta also plans an at-the-market program, a way to sell Class C shares gradually over time. It could start in the first quarter of 2027. The company said the terms are not final and no agreement has been signed.

Meta said it would receive the money from the common stock sale later rather than right away. The cash would arrive when its forward sale agreements, deals to hand over shares at a future date, are completed. It plans to use the proceeds for general corporate purposes.

Why did the shares fall after the announcement?

New shares could dilute existing holders. Dilution means each existing share represents a smaller slice of the company and its profits. That risk often weighs on a stock when a company announces a share sale.

The move stood out against the wider market. The S&P 500, which tracks the largest U.S. companies weighted by market value, rose 0.7%. The communication services sector fund (XLC) slid 1.6%.

Meta edged up 0.2% in after-hours trading. After Monday's decline, the shares sit 18.9% below their 52-week high of $777.59.

Why does Meta need the money?

Meta expects heavy capital spending, money spent on buildings and equipment, this year. It is expanding data centers and computing capacity. The company said it plans to fund that spending with operating cash flow, debt, partnerships and stock sales. It also held a large cash balance at the end of September. Its third-quarter revenue grew from a year earlier.

Chipmakers that sell AI hardware rose on the day. Nvidia (Nasdaq: NVDA) rose 2.4%, Advanced Micro Devices (Nasdaq: AMD) gained 2.8% and Broadcom (Nasdaq: AVGO) added 2.3%. The technology sector fund (XLK) rose 1.7%.

Reports said Nvidia, AMD and Broadcom have expressed interest in buying part of Meta's Class A stock offering. Those indications are nonbinding, so actual purchases could differ or may not happen.

What do analysts and critics say?

BNP Paribas analyst Nick Jones kept an Outperform rating on Meta, a view that the stock may do better than the market. He said the plan fits the company's faster AI investment and early traction for products such as Muse. Jones also said investors want more clarity on how Meta plans to make money from Muse.

Sen. Elizabeth Warren raised a broader concern the same day. She warned that heavy AI spending and rising corporate debt could expose the economy to financial risk. She shared a report from the Open Markets Institute and Americans for Financial Reform Education Fund that names Meta among big AI spenders. The report argues AI spending is outpacing AI revenue, though it does not predict an inevitable downturn.

What could come next for shareholders?

What’s next: Meta has not set the size, timing or terms of the at-the-market program. The company said that program could follow once its Class C shares begin trading. The Federal Reserve announces its interest-rate decision on Oct. 28 at 2 p.m. ET. AMD reports quarterly results on Nov. 3, which may offer another read on demand for AI chips.