Meta Platforms Inc sold US$10.5 billion of investment-grade bonds, its largest-ever debt sale, which will boost its cash pile as the company spends heavily on artificial intelligence.

The Facebook and Instagram parent company on Wednesday offered notes in five parts for general corporate purposes, according to a person with knowledge of the matter. The longest portion of the deal, a 40-year security, yields 1.3 percentage points above treasuries after initial discussions of around 1.55 percentage points, said the person, who asked not to be identified as the details are private.

“Meta’s sale is a sign that their investment in AI is not slowing down and is likely to increase over the next couple of years,” Bloomberg Intelligence analyst Robert Schiffman said in a phone interview. “Meta has an ample amount of cash, but it’s a more efficient use of capital to borrow money in the bond market.”

A representative for Meta didn’t respond to a request for comment.

The deal is its biggest high-grade bond sale ever, according to data compiled by Bloomberg. The social-media behemoth made its debut in the high-grade bond market in 2022, selling US$10 billion. It returned to the market last year with an US$8.5 billion deal.

Some high-flying tech firms that saw their stocks soar this year amid hopes surrounding AI were pressured ahead of the global market selloff, with investors seeking more progress on the technology. Meta was an exception, with its shares jumping after the release of second-quarter results that topped expectations and signaled the company’s investments are helping it sell more targeted ads.

Issuing bonds now gives firms like Meta increased financial flexibility even if they have large sums of cash on its balance sheet, according to Schiffman. Meta had US$58.1 billion of cash, cash equivalents and short-term investments as of June 30.

“The name has been under-levered and they have been talking about raising their debt levels,” Schiffman said. Selling bonds gives Meta flexibility and it “can keep investing in AI and the metaverse.”

Meta has been spending heavily on data centers and computing power as chief executive officer Mark Zuckerberg works to build a leading position in AI. The company last week raised the low end of 2024 capital-spending projections, putting the range at US$37 billion to US$40 billion.

Meta is one of 17 companies in the market Wednesday with investment-grade bonds. Blue-chip companies started returning to the primary market Tuesday after all planned deals to start the week were held back amid stock plunges around the world. Calm started returning Tuesday, with tighter risk premiums making funding more attractive and the average high-grade bond yield at 5.06%.

Ahead of the market tumult, dealers had expected US investment-grade issuance to total about US$40 billion this week. There were US$6.8 billion of bonds priced on Tuesday.

Bank of America Corp, JPMorgan Chase & Co and Morgan Stanley managed the bond sale, said the person.

  - Bloomberg