Meta's nearly $100 billion stock sale is a turning point for how Big Tech pays for AI

For a decade, Big Tech's cash machines paid for every moonshot. Now Meta ( META ) is passing the hat, and the plan behind it began with a standoff between Mark Zuckerberg and his board.

Meta is selling nearly $100 billion of stock to pay for AI . Even Nvidia ( NVDA ) is chipping in $3 billion. The company that sells Meta its AI chips is now buying its stock, too.

Meta isn't the only giant coming up short. Amazon ( AMZN ) and Alphabet ( GOOGL ) each spent more than their businesses brought in during a quarter this year, then borrowed heavily. Meta is the first to hand much of the bill to shareholders instead.

Meta priced $25 billion of regular stock at $625 a share, below Friday's close. Another $12.5 billion went into preferred stock that pays 6.5% and turns into common stock in 2029.

The biggest piece, up to $60 billion, hasn't been sold yet. It's a new class of nonvoting stock that Meta plans to sell a little at a time starting next year.

Last quarter, Meta spent almost $34 billion on buildings and equipment, mostly for AI. Its business brought in almost $33 billion of cash. That pushed free cash flow negative for the first time since 2012, the year Meta went public.

The company that bought back about $45 billion of its own stock in 2021 hasn't bought back a share in a year. Now it's selling.

A house, a board and a stock with no vote

Meta's nonvoting shares grew out of a fight over Zuckerberg's taxes, a company filing shows . He told the board he planned to leave California before the Nov. 3 vote on a billionaire tax. At a Sept. 9 board dinner, he said he'd list his Palo Alto home within days.

Five days later, they struck a deal. Every shareholder gets a free nonvoting share for each share owned, the same kind Meta plans to sell . The filing says Meta needs to raise "hundreds of billions of dollars" over several years.

Zuckerberg owns about 13% of Meta but controls about 61% of the votes, and shares without a vote keep it that way. Your money is welcome. Your vote isn't needed.

The cost of insuring Meta's debt against default hit a record 127 basis points Friday, then eased Monday even as the stock slipped. At 120, Meta's five-year credit default swaps imply nearly a 10% chance of default over five years, up from about 4% a year ago, by Yahoo Finance calculations.

Bond investors are more worried than stock investors. The riskiest junk bonds now pay nearly 8 percentage points more than slightly safer ones, according to BTIG data cited by The Market Ear . The last four times the gap got that wide, the S&P 500 ( ^GSPC ) was already down at least 12% from its high. Today it's only about 2% off.