Wall Street Questions AI Spending: S&P Cuts Meta Outlook to Negative

Wall Street questions AI spending — S&P cuts Meta outlook to Negative

The market's narrative around artificial intelligence is shifting from "technology-expectation pricing" to "cash-flow and return-on-investment pricing." The clearest signal came on October 30–31, 2026, when S&P Global Ratings cut Meta Platforms' outlook from Stable to Negative, the first time a major rating agency has flagged a trillion-dollar AI spender over capital spending.

The Rating Move

S&P kept Meta's AA- rating but changed the outlook, citing heavy AI capital expenditure, free operating cash flow pressure, and uncertain monetization. The agency forecasts Meta free-cash-flow deficits of about 22 billion dollars in 2026 and 71 billion dollars in 2027, and also downgraded Broadcom's outlook from Positive to Stable. Meta's third-quarter free cash flow already turned negative.

The Broader Squeeze

OpenAI trimmed its pre-IPO funding target by 10 billion dollars, from 30 billion to 20 billion, with its valuation easing from 1.4 trillion to 1.25 trillion dollars. The U.S. Securities and Exchange Commission said on October 31 it has begun reviewing how AI companies disclose risks and spending. In October the Nasdaq fell about 6 percent, with Nvidia down 10.4 percent, Alphabet down 18.7 percent, Meta down 15.2 percent, and Intel down 45.3 percent.

The Cash-Flow Math

Reuters' analysis of five large tech firms shows nine-month operating cash flow of 542.9 billion dollars, up 29 percent, but capital expenditure doubled to 556.9 billion dollars — the first time capex exceeded the cash those businesses generated. Combined free cash flow swung from a 143.5 billion dollar surplus a year earlier to a 14 billion dollar deficit, and 50.6 billion dollars returned to shareholders was funded by reserves and borrowing.

Key Data Points

• Meta outlook: Stable to Negative (rating held at AA-)
• Forecast Meta free-cash-flow deficit: 22 billion dollars in 2026, 71 billion dollars in 2027
• OpenAI funding target cut: 10 billion dollars (30 billion to 20 billion)
• Five firms' nine-month capex: 556.9 billion dollars vs 542.9 billion dollars cash flow
• Nasdaq October decline: about 6 percent

Sources: Reuters, Financial Times, Sina Finance, Global Times, threerouter