Meta Platforms Inc. (META) is facing growing investor scrutiny over the cost of its AI buildout as rising capital commitments, equity issuance and weaker free cash flow raise questions about how quickly the company can convert heavy spending into returns.

S&P Flags Credit Risk As AI Spending Rises

S&P Global Ratings lowered the outlook on Meta's AA- credit rating to negative, citing rising leverage and uncertainty over how long elevated capital spending and negative free operating cash flow could persist.

S&P said Meta has more limited visibility into AI monetization than some peers and questioned when new AI investments will begin producing revenue that materially exceeds their costs.

The rating firm expects Meta's capital expenditures to reach about $140 billion in 2026 and rise above $225 billion in 2027. It also projects leverage could climb above 1.0 times next year from roughly 0.1 times last year.

Meta disagreed with S&P's assessment. Company spokesperson Kamran Mumtaz told Bloomberg on Friday that Meta sees significant product and business opportunities ahead and believes its credit profile remains very strong.

Future Commitments And Equity Raise Add Pressure

Meta has disclosed more than $800 billion in future spending commitments, with nearly half tied to leases that have not yet started, largely for data centers and energy infrastructure.

CFO Susan Li said Meta expects to continue investing aggressively across its core business and emerging AI initiatives.

Meta also recently completed a $25 billion stock sale at $625 per share, while maintaining an at-the-market program that could sell up to another $60 billion of stock.

The stock fell below the offering price during Friday trading, adding to concerns around funding needs and shareholder dilution.

The stock has also reversed the gains that followed Meta's September launch of Muse, its personal AI agent, Bloomberg reported on Friday. Meta continues exploring monetization opportunities around Muse and other AI products through subscriptions, transaction fees and potentially advertising.

The company is also developing a possible cloud business that could sell access to AI models or raw computing capacity.

Baruch Trims Meta On CapEx Headwinds

Blue Line Capital founder and president Bill Baruch said he reduced Meta to 1.5% of his portfolio from 2.5%.

Baruch told CNBC last Wednesday that the company's capital-spending outlook has become a major headwind, pointing to expected 2026 capex of $135 billion to $145 billion and estimates approaching $200 billion for 2027.

He also highlighted negative free cash flow and said the stock failed to sustain momentum following the Muse launch and earnings.

Baruch said his firm is raising cash to maintain flexibility and chose Meta as one position to reduce.

Brown Keeps Meta Out Of His Portfolio List

Ritholtz Wealth Management CEO Josh Brown also turned more cautious on Meta for the intermediate term.

Brown removed Meta from his "Best Stocks in the Market" list after the stock weakened following its Muse-driven rally, equity issuance and renewed questions about AI funding.

He told CNBC on Tuesday that he would not re-enter the stock unless it reclaimed its 50-day moving average near $664.

Brown said Meta may still work as a long-term holding, but for now he sees too many stronger stocks elsewhere to focus on when Meta might rebound.

META Price Action: Meta Platforms shares were up 0.61% at $618.77 at the time of publication on Monday, according to market data.