Meta shares sink 7% as AI spending, cash burn and a stock sale plan rattle investors

Meta Platforms shares fell roughly 7% on Thursday, a day after the company reported its first cash burn in over a decade and announced a plan to create a new class of nonvoting stock to help pay for its AI ambitions. Prices on insurance against a Meta default also climbed to a record, and the Nasdaq Composite was on track for its largest decline in four months.

This is the kind of day that shows how big the Super Intelligence trade has become. When the spending is measured in hundreds of billions, the market starts reading the receipts.

The numbers behind the drop

Start with the cash. Meta's free cash flow came in at negative $2.12 billion for the third quarter, even as revenue jumped 26% from a year earlier. Growth is not the problem here. The problem is what it costs to get it.

Then the spending plan. Meta now expects full-year capital expenditure of $135 billion to $145 billion, raising the bottom of its range from $130 billion. A $5 billion bump to the floor sounds modest next to those figures, but investors noticed that the company is moving only one direction.

There is also the long tail. Meta says it has agreed to spend about $825 billion in the future on leases and contracts, many of them tied to computing power and AI infrastructure. In July it reported almost $700 billion.

The selloff itself, by the numbers:

• Meta fell about 7% by most accounts. Reuters reported a drop of more than 7%, and a later Reuters report carried by Investing.com put it at 8%, which would be Meta's largest single-day drop since July.
• SpaceX declined 9% and Nvidia, described as a bellwether of the AI trade, dropped 4%.
• Bloomberg Tech's closing-bell segment framed the day as "Meta Slides 7% as AI Spending Fuels Credit Fears."

The credit market flinches

The credit fear is not just a headline. According to Bloomberg reporting carried by Yahoo Finance, the price of five-year credit default swaps on Meta's debt rose as much as 8.9 basis points to around 119.3 basis points a year, per ICE Data Services. That is the highest intraday level since the swaps started trading. CNA reported the swaps at a record 114.79 basis points on Thursday. The reports give different record levels.

Meta's bonds also weakened against Treasuries. And the nervousness spread: credit protection costs tied to Oracle, Microsoft and Broadcom rose too.

Investors were already jumpy this month. According to the reporting, they had been dumping shares of neoclouds such as CoreWeave and Nebius, which are spending several times their revenue on data centers. Experts have warned that heavy borrowing leaves AI companies exposed to a sharp drop in demand, while saddling them with chips that depreciate within five or six years and force another round of spending.

Matthew Maley, chief market strategist at Miller Tabak, said the selling started with "the big question about the (return on investment) on all the spending." He added: "It’s just becoming more and more evident to people that it’s going to take a lot longer." Thomas Hayes, chairman of Great Hill Capital, agreed that return-on-investment concerns are central.

Selling stock to avoid selling bonds

Here is the part I find genuinely fascinating. In its earnings release on Wednesday, Meta said it will create a new class of nonvoting Class C common stock. The stated purpose is to preserve its "founder-led structure" and "provide Meta the ability to finance its growth."

The scale is the headline. Meta said it could raise hundreds of billions of dollars over several years for AI investments, acquisitions and employee compensation, with issuances beginning as early as fall 2026. The regulatory filing also noted that issuing the shares helps avoid debt financing that could hurt Meta's credit ratings.

Put those together and the day makes a certain sense. Credit markets are already pricing in more risk, and the company's chosen alternative is to sell more equity, which investors do not love either. Voting control stays where it is, and the new money comes from shareholders who get no vote.

What to watch

The reporting leaves real gaps. It does not say how many Class C shares Meta plans to issue first, at what price or valuation, or on what exact date beyond "as early as fall 2026." It also does not give Meta's current credit rating tier or outlook, nor third-quarter net income or earnings per share beyond the 26% revenue growth.

So the checklist is short and pointed:

• The first Class C issuance: size, timing and pricing.
• Whether credit default swaps on Meta and its hyperscaler peers keep climbing.
• Whether the capex range moves up again.
• Whether the return-on-investment question gets an answer, or just a bigger number.

Meta is still growing at 26%. The market's message on Thursday was that growth now has to come with a bill it can read.