Mark Zuckerberg’s Meta has announced plans for a $95bn (£71bn) fundraising to cover its AI expenditure, even as Elon Musk warned that funding for smaller players in the sector was drying up. The owner of Facebook, Instagram and WhatsApp is a leading investor in AI and is ploughing multibillion-dollar sums into datacentres, the central nervous systems of the technology. Meta’s announcement on Monday came after Musk added to the pressure on “neocloud” datacentre providers – which lease out computing power to AI companies – by saying the sector faced “death and consolidation” amid concerns over the sustainability of their funding.
The Meta fundraising will come in two parts. In the first, the company plans to raise $35bn through new “underwritten public offerings” – a sale of company stock. This offering has some big name backers, with chipmakers Nvidia, AMD and Broadcom all showing interest in taking part, Meta said.
These “cornerstone investors” could buy up to $5bn of the stock on offer. In the second, Meta also plans to launch a $60bn “at-the-market offering” in which it will sell new common stock to investors at the going market rate in future. That offering involves selling Meta’s new class C stock, which it announced it was creating last week.
These class C shares do not have voting rights, so can be sold without diluting Zuckerberg’s control of the company. The Silicon Valley companies said these plans would support “Meta’s continued investment in AI infrastructure and personal super intelligence”. Shares in Meta rose in premarket trading on the news.
However, other companies in the AI sector found themselves under further pressure on Monday. Shares in Nebius, CoreWeave and Iren dropped more than 2% in premarket trading on Monday after Musk said more than 200 neocloud firms were in trouble, although they later rose after trading began. Drawing an analogy with the survival prospects of the guppy fish – which has a reputation for struggling to thrive in domestic fish tanks – Musk added: “That means the 200+ neoclouds are going to see guppy-level death and consolidation.
Some will make it through, but not many.” The chief executive and largest shareholder of Tesla and SpaceX – which also owns and operates datacentres – was responding to a post by the venture capitalist Chamath Palihapitiya, who had written on the Musk-owned platform that neoclouds were “disorganized and poorly capitalized”. Fears over the financial stability of neocloud businesses are focused on their high levels of borrowing – approximately $35bn at CoreWeave, for example – and whether the AI market will grow fast enough to service it. Neil Wilson, an analyst at the investment platform Saxo UK, said the differing market reactions showed investors were more willing to support the AI investment plans of financially robust companies.
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