OpenAI Cuts Funding Target by $10 Billion as S&P Warns of Cash Gap at Meta
Key Facts
OpenAI has cut its target for its current funding round by $10 billion to about $20 billion, according to a report cited by Reuters from the Financial Times, as S&P Global Ratings revised its outlook on Meta to negative from stable because of uncertainty over capital spending and free operating cash flow. The lower funding target marks a shift from the previous level of $30 billion, while the agency linked its outlook change to the cash trajectory that Meta’s expansion plans could leave behind. The two developments put the ability of AI companies to finance their expansion and convert spending into cash flows at the center of the sector debate. Alphabet’s results, by contrast, show annual revenue growth alongside substantial spending on property and equipment and negative free cash flow in the third quarter. In markets, Alphabet shares fell sharply on October 29, then the S&P 500 and Nasdaq declined the following day amid a technology stock sell-off and concerns about elevated valuations.
According to the Financial Times, as cited by Bloomberg News, OpenAI is targeting about $20 billion at a valuation of $1.25 trillion, compared with a funding target of $30 billion and a valuation of $1.4 trillion the previous month. That amounts to a $10 billion reduction in the round’s stated target, alongside a lower target valuation. A Reuters report said the first close of the round could raise less than $20 billion after some investors cut their allocations. The deadline for investor commitments, according to the report, was Friday. The company is also seeking to complete the round in part before rival Anthropic’s expected public offering, while the report said OpenAI is pursuing a 2027 listing.
Meta forecast annual capital spending of between $135 billion and $145 billion in 2026, after posting a free cash flow deficit of $2.12 billion in the third quarter. S&P believes spending could keep free operating cash flow negative beyond 2028. The agency expects a deficit in this cash flow of $39 billion in 2026 and $71 billion in 2027. It also expects Meta to fund its 2028 cash deficit entirely with debt. The outlook revision, according to S&P’s rationale, reflects concern over a widening gap between capital spending and the company’s available cash resources.
S&P believes Meta’s debt could exceed 1.0 times as early as 2027, the level the agency sets as the threshold for an AA- issuer rating. That estimate links the expected financing of spending and deficits to the company’s leverage trajectory. A Meta spokesperson said the company disagrees with the agency’s assessment of its ability to monetize AI. “We respectfully disagree with S&P’s assertion regarding Meta’s ability to monetize AI,” the spokesperson said. The company added that it sees significant opportunities in its products and business that support its credit profile. Meta’s position offers a different reading from the agency’s warning: the company focuses on revenue potential, while S&P focuses on the impact of spending and cash flows.
Alphabet reported that consolidated revenue rose 25% year over year to $127.6 billion in the third quarter of 2026. Google Search and other revenue grew 12% during the period, while Google Cloud revenue surged 103% to $30.7 billion. CEO Sundar Pichai said the company’s revenue grew 25% and that Cloud growth was driven by strong demand for infrastructure and AI solutions. Purchases of property and equipment totaled $51.355 billion in the same quarter. Free cash flow, meanwhile, posted a deficit of $9.065 billion, placing revenue growth alongside the cash cost of investment in the company’s results.
In trading, Alphabet Class A shares fell 12.6% on Thursday, October 29, marking their worst day since they began trading more than 20 years ago. In Friday’s session on October 30, the S&P 500 fell 1.8%, its worst daily performance since June, and the Nasdaq Composite declined 2.9%. The Associated Press attributed the technology stock sell-off to growing concerns about elevated valuations of AI stocks. Alphabet shares closed at $279.84 on October 30, while Meta shares ended the session at $614.99. The closing prices show where the two stocks stood at the end of the session, while the interpretation of their daily moves remains tied to the company results and market concerns cited by the sources.