Whalesbook
Funding Meta's AI Data Center
Meta Platforms is reportedly finalizing a $13 billion financing package for its ambitious data center project in El Paso, Texas. This funding, primarily debt with an equity component, is for an AI-focused facility aiming for 1 gigawatt of capacity by 2028. The news comes as the tech industry sees a major increase in spending on artificial intelligence infrastructure. Meta's El Paso commitment alone has grown to over $10 billion, more than six times earlier estimates. This expansion aims to meet the growing demand for computing power needed for advanced AI models.
Meta's Growing Debt Use
The immense cost of AI infrastructure is leading even major tech companies to adjust their financing strategies. Meta recently completed a $25 billion debt offering on May 4, 2026, with maturities stretching to 2066. This shows a strategic shift towards using debt markets more heavily, a change from its past approach of limiting debt. As of March 2026, Meta's debt-to-equity ratio was around 0.36, which is 112% higher than its 10-year median. The ratio had steadily risen, reaching 0.24 by May 1, 2026. While this leverage could support rapid growth, it requires close attention, especially compared to competitors.
Competitors' AI Spending
Meta is not alone in this expensive race. Major tech companies are making massive investments in AI infrastructure for 2026. Amazon plans about $200 billion, with $50 billion for U.S. government AI projects. Microsoft is allocating roughly $190 billion, adding $25 billion for higher component costs. Alphabet is guiding for $175-$185 billion, recently increasing it to $180-$190 billion. Together, these companies are expected to spend over $630 billion on AI infrastructure in 2026. This heavy spending highlights the need for all players to secure computing power, even as it impacts their finances. For comparison, Amazon's debt-to-equity ratio is around 0.27 to 0.48, Alphabet's is 0.16 to 0.19, and Microsoft's is generally 0.14 to 0.32.
Challenges and Financial Risks
Despite Meta's strong financial results, including Q1 2026 revenue of $56 billion (up 33%) and a healthy operating margin, its growing debt raises potential risks. The company's debt-to-equity ratio, including other obligations, has risen significantly from 0.12 in 2021 to an estimated 0.39 by 2025. Meta's long-term debt also more than doubled year-over-year by December 2025. While analysts generally have a 'Buy' rating, they note Meta's debt-to-equity ratio is 112% above its 10-year median and point to caution. Concerns about the return on investment for large AI infrastructure spending are widespread in the sector, intensified by competition and questions about growth sustainability. Adding to these pressures are recent layoffs at Meta and ongoing legal cases concerning harm to young users, which could force costly changes to its advertising model. The company has increased its 2026 capital expenditure guidance to $125-145 billion, indicating ongoing heavy investment that must generate strong returns to offset rising debt.