Meta Among Tech Giants Issuing $120B in Bonds as AI Bubble Risks Grow
Meta Platforms was among tech giants that issued $120 billion in bonds last year, nearly three times the prior decade’s average, as companies leveraged debt to fuel AI expansion. Economist Mohamed El-Erian warns that this overinvestment has created a rational bubble which, if punctured, could trigger a sell-off wiping out up to $20 trillion in shareholder wealth.
1. Record Bond Issuance
Meta Platforms joined nine other leading tech firms in issuing a combined $120 billion of corporate bonds last year, nearly triple the decade’s average. This marked surge in debt financing reflects the industry’s push to fund AI infrastructure and expansion.
2. Rational Bubble Warning
Economist Mohamed El-Erian cautioned that the rapid overinvestment in AI has created a ‘rational bubble’ where valuations rest on the fear of being left behind. He estimates a significant market correction could vaporize as much as $20 trillion in shareholder value if investor sentiment shifts.
3. Leverage and Spillover Risks
Meta’s elevated debt load increases its vulnerability to a broader market downturn, especially if AI adoption slows or credit conditions tighten. Circular financing practices among hyperscalers could amplify any sell-off, potentially triggering rating reviews and higher borrowing costs for Meta.