"Meta Spends, Doesn't Make Enough"... Is an 'AI Shock' Coming?

[Anchor]

Skepticism is spreading across industries over whether AI, which requires massive investment costs, can actually generate corresponding profits. Alphabet, Google's parent company, and Amazon saw their third-quarter earnings fall short of market expectations, while Intel's stock price plummeted by 45% during the month of October. As big tech and semiconductor companies reel from this "AI bubble theory," international credit rating agency S&P has even downgraded its credit outlook for Meta.

Reporting from New York, correspondent Kim Hyunwoo has the details.

[Reporter]

S&P, one of the world's top three credit rating agencies, has revised its credit outlook for Meta, the operator of Facebook and Instagram, from stable to "negative."

This is a signal that Meta's credit rating could be lowered in the future.

S&P explained the adjustment by stating that Meta's ability to generate revenue through AI investments is more limited compared to other competing companies, adding that the scale of its future facility investments remains unclear and its multi-year AI investment plan is highly aggressive.

The agency judged that while the cost burden is continuously growing due to increased AI investments, its future profit-generating capability remains uncertain.

In fact, during its third-quarter earnings announcement last month, Meta spent 2.1 billion dollars more on investments than the money it earned from business operations, causing its free cash flow—the cash left over after investments—to turn negative for the first time since its 2012 IPO.

Despite this, the company announced plans to spend up to 145 billion dollars solely on facility investments this year. S&P projected that as Meta's investments continue to grow, its funding shortfall could swell to 710 billion dollars next year, which is approximately 95 trillion won in Korean currency.

If the credit rating is actually downgraded, Meta would have to pay higher interest when borrowing money, further increasing its funding burden.

[Matt Kennedy / Senior Strategist, IPO-focused Investment Firm: Everyone knows that growth is possible, but the core of investment decisions is whether that can actually translate into profits.]

Meta stated that it disagrees with S&P's assessment and countered that the company remains solid. However, concerns in the market are growing as other digital big tech companies ramping up AI investments, such as Alphabet and Amazon, are also seeing their cash flows turn negative one after another.

(Video Editing: So Ji-hye)
※ Please note: This article was translated by AI and may contain errors.