🦔The cost of insuring Meta’s debt against default hit a record today, and its bonds fell, after Meta said it has now agreed to about $825 billion in future leases and contracts, mostly for AI computing. That figure was close to $700 billion in July. Meta’s free cash flow also turned negative last quarter, at minus $2.1 billion, compared with plus $10.6 billion a year earlier. The stock dropped almost 6%. My Take Meta’s default insurance costs about 119 basis points a year, well below Oracle near 290 or CoreWeave near 1,200 last week, so lenders still see Meta as a safe borrower. I’m a bit rattled by the speed though. Meta piled on roughly $125 billion of new commitments in three months, and its ad business, one of the best cash machines in corporate America, no longer covers the spending by itself. If Meta has to borrow to keep up, I can’t think of an AI spender that won’t. Bond buyers are already looking at a wall of AI debt, with SpaceX shopping a $40 billion deal and Broadcom lining up $60 billion of chip financing for Anthropic. Every new deal has to pay a little more to get noticed. We'll probably see Meta sell a large bond before year end at a higher rate than it would have paid in the spring. It raised the low end of its spending forecast for this year and wouldn’t give one for next year, so free cash flow probably stays negative for a while. Hedgie🤗