Meta Platforms lost $124 billion in market value in a single trading day on Thursday. The reason for this collapse was not a product failure, but a financial decision by the company: Meta announced the issuance of a new class of non-voting shares to finance artificial intelligence (AI) and raised the lower bound of its capital expenditure plan for 2026 to $135 billion.
This represents a new financial model for AI development. Last quarter, Meta reported a negative free cash flow of $2.12 billion, marking the first time it has burned cash in over ten years. Among the largest cloud service operators, annual capital expenditures reached approximately $750–$850 billion and are approaching a trillion, exceeding operating cash flow capabilities.
Consequently, there is a shift in the financing structure. The initial phase relied on borrowed funds: major technology corporations raised about $250 billion in global debt markets this year, with the total issuance projected at nearly $320 billion, representing an increase of about 60%. Now, financing is being secured through equity capital, which entails the dilution of existing shareholders' stakes.
Difficulties are first appearing in the credit channel. CoreWeave's safe bonds yield around 15%, and its five-year credit default swaps have approached 1200 basis points. A significant portion of these instruments is held in private credit funds and annuity portfolios, where losses are discovered slowly and unnoticed.
The pessimistic scenario extends beyond just interest expenses. Accelerators depreciate over three to four years, and each new generation can render the previous one obsolete; part of the sector's growth was financed through cyclical schemes where chip suppliers supported the chip buyers themselves.
The discussion about profitability has become public. John Lovelock of Gartner, whose forecast contributed to the decline this month, describes this race as a 'last man standing' position, where most AI markets will 'shrink to a duopoly.' Companies involved in non-cloud services have already shown their stance: South Korea's Elice fell by more than 30% upon debut; Firmus, AirTrunk, and SB Energy postponed their listings.
Market proponents acknowledge the funding problem but disagree with the demand issue. Matthew Maley of Miller Tabak stated: 'No one is worried that Meta, Amazon, or Google will receive the funding they need. But if it becomes prohibitively expensive for smaller companies, then a collapse isn't necessarily required to cause concern among people.'
The market judgment came quickly but was narrow: the Nasdaq fell by 2.6%, while the Dow remained unchanged—this was rotation, not a final verdict. What is being tested is not the fact of building AI, but whether the funding will arrive before expected revenues materialize.