has initiated a massive $50 billion capital infusion, split between debt and equity, to fuel its infrastructure commitments. While the firm successfully cleared its initial debt hurdles, the market reaction has been swift and unforgiving. The stock price plummeted approximately 10% in a 48-hour window, reflecting deep-seated investor anxiety regarding the fiscal sustainability of massive AI infrastructure builds.
. Building the specialized capacity required for next-generation generative models is an incredibly capital-intensive endeavor. This isn't a one-time expense; estimates suggest the firm may need to replicate this $50 billion raise annually for the next several years to meet promised capacity. The sheer scale of this recurring capital requirement threatens to eclipse the cash flow generated by its core software business.
AI circular deals disaster
Deteriorating Credit Quality and Junk-Bond Risk
The cost of this expansion is rising. Rating agencies recently tagged
's senior secured debt with a BBB- rating—the lowest tier of investment-grade status. With the firm projected to enter negative cash flow territory this year, its ability to service or pay down this debt is under scrutiny. If fiscal health continues to slide, future rounds of financing will likely be classified as high-yield junk bonds, significantly increasing interest expenses and squeezing margins.
The At-the-Market Equity Drag
To minimize the shock of a massive secondary offering,
is utilizing an 'at the market' (ATM) equity strategy. By selling shares incrementally—estimated at 10% of daily trading volume—the company avoids a single overnight price crash. However, this creates a 'slow bleed' effect. This constant selling pressure could act as a ceiling on the stock price for up to 10 weeks, as the market struggles to absorb the relentless supply of new shares.
