Meta raises $12 billion for new data center: investors demand higher yield due to AI risks

Meta is investing billions in the development of AI infrastructure

American corporation Meta Platforms plans to attract $12 billion to finance the construction of a new data center with a capacity of approx one gigawatt in El Paso, Texas. The project is part of the company's large-scale strategy to expand the infrastructure for the development of artificial intelligence and increase its own computing capacity.

Financing will be carried out through a specially created company Sopaipilla Investor, 80% of which belongs BlackRock, and another 20% — Meta.

Investors demand a higher yield

While preparing for the bond offering, Meta faced rising borrowing costs. Potential investors are offered a yield over 7%, however, some lenders insist on an additional risk premium.

According to preliminary estimates, investors expect approx yield is 0.4 percentage points higher, than during the previous large-scale financing of the project Hyperion, within which the company attracted last autumn $27 billion.

Experts point out that even raising the rate of just 0.1% could mean tens of millions of dollars in additional debt service costs for the company each year.

Why the market has become more cautious

The increase in the cost of financing is associated with a general change in sentiment on the financial markets. After the rapid development of the artificial intelligence sector, investors are increasingly assessing the risks of large-scale investments by technology companies.

Against the backdrop of active borrowing by the largest IT corporations and the volatility of shares of AI-related companies, creditors are demanding higher compensation for the possible risks of long-term projects.

What guarantees will creditors receive

Bonds issued through Sopaipilla Investor, will have a maturity date of 2048 year. They will be provided by Meta's long-term lease payments, which the company will start making from 2028 year.

The financing terms also include a number of additional guarantees for investors. In particular, Meta agreed to independently cover all overruns of the construction budget over the established limit 105% from the initial cost of the project.

In addition, if the company decides to terminate the lease of the facility early, it will have to pay a significant penalty, except in cases of serious accidents or long construction delays. At the same time, the physical assets of the data center are not pledged to creditors.

Rating agencies positively assessed the deal

Despite the increased caution of investors, international rating agencies highly appreciate the reliability of the project.

S&P Global Ratings rated the bonds A+, which is only one level below the corporate rating of Meta itself (AA-), calling the financing structure "very reliable". Agencies Fitch Ratings and KBRA also rated the release at the level AA-.

Meta continues the massive race in the field of artificial intelligence

The construction of the new data center is part of Meta's long-term strategy to strengthen its own AI infrastructure. The company plans to double the total computing power of its data centers to 14 gigawatts, and also develops its own processor for artificial intelligence under the code name Iris, which should help reduce reliance on third-party vendors, including Nvidia.