S&P Global Ratings downgraded Meta Platforms Inc.'s outlook to negative from stable, affirming the AA- long-term issuer credit rating. The shift reflects growing concern over the company's massive capital expenditures for artificial intelligence infrastructure.
Meta stock dropped 1.5 percent to $614.99 on the news. The Nasdaq Composite fell 2.9 percent to $25,437.
S&P cited the aggressive pace of Meta's AI buildout, which is projected to keep free cash flow negative in the near term. That pressure could erode Meta's cash reserves and limit its ability to fund shareholder buybacks and dividends. The ratings agency emphasized the need for Meta to maintain a strong balance sheet during this investment phase.
Meta is betting heavily on AI to strengthen its advertising business and develop new products like the metaverse. The strategy carries execution risk. Investors are demanding clearer paths to monetization from these large-scale outlays. Nvidia and Microsoft are also investing heavily in AI, but their existing revenue streams currently offset capital spend more effectively.
The company will report fourth quarter 2026 results in early February. S&P will monitor whether Meta can demonstrate a credible route back to positive free cash flow.
