OpenAI cuts fundraising target as S&P hits Meta with credit warning
Wall Street pushes back on AI spending: OpenAI trims its raise to $20B while S&P downgrades Meta's outlook over cash burn and capex.
What to know
- OpenAI cut its fundraising target to $20 billion from $30 billion and trimmed its expected valuation to $1.25 trillion, reflecting weaker investor appetite after a tech selloff.
- S&P Global downgraded Meta's outlook to negative, warning its leverage could cross the downgrade threshold for its AA- rating as soon as 2027 due to negative free cash flow and heavy capex.
- Signals are mixed: Anthropic's IPO filing and Microsoft's cloud results were strong, but Alphabet's record one-day stock drop and persistent AI-debt fears have turned the broader financing narrative bearish.
- Meta disputes S&P's assessment, while the agency flags that Meta's ability to monetize AI investment is more limited than peers who lease out compute capacity.
“While we believe the company intends to monetize these investments via improved advertising tools that support faster ad revenue growth, as well as from the development of new revenue streams stemming from its introduction of agentic apps such as Muse, it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years”
S&P Global, Credit ratings agency · Fortune ↗ · Oct 30
OpenAI AI developer, ChatGPT makerMeta Social media and AI companyS&P Global Credit ratings agencyAnthropic OpenAI rival, preparing IPO
Elon Musk SpaceX CEOAlphabet Google parent company
How it unfolded 2 developments, newest first · click a bar or a number to jump articles
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Meta pushes back on S&P's credit assessment
A Meta spokesperson told Fortune the company disagrees with S&P's outlook downgrade and the assumptions behind its cash-flow and monetization warnings.
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S&P Global downgrades Meta's outlook to negative
S&P Global cut Meta's outlook to "negative" from "stable" late Friday, keeping its AA- rating but warning leverage could top the 1.0x downgrade threshold as soon as 2027, with free operating cash flow projected to stay negative through 2028.
“it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years…”
— S&P Global -
background
OpenAI slashes fundraising target to $20 billion — Sources told the Financial Times OpenAI cut the target of its latest round to $20 billion from $30 billion, lowering its expected valuation to $1.25 trillion from $1.4 trillion, after a brutal week-long tech selloff.
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SpaceX, Meta and Microsoft tap markets for fresh capital — In the same week, Elon Musk said SpaceX closed $40 billion in debt financing, Meta announced plans to raise $95 billion in equity, and Microsoft raised $25 billion in a bond sale.
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Microsoft and SK Hynix post strong results amid the gloom — Microsoft reported strong cloud growth and stayed cash-flow positive but said capital spending would accelerate, while chipmaker SK Hynix beat earnings forecasts, offering a partial counterweight to the bearish mood.
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Alphabet stock falls 12% on deepening cash burn — Alphabet's third-quarter results showed cash flow sinking deeper into negative territory as it joined Meta and Amazon in ramping up spending; the stock fell about 12% Thursday, its worst day on record.
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Anthropic files S-1 ahead of planned IPO — Anthropic filed an S-1 on Monday showing soaring revenue and cash flow turning positive in the first half of the year, as it prepares to go public next month and upstages OpenAI's funding round.
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AI debt fears hit neocloud shares and bonds — Earlier in October, fears about AI-related debt sent shares and bonds of "neocloud" companies tumbling, turning the broader financing narrative bearish ahead of this week's events.
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