Meta's AI Push Recalls 90s Dark-Fiber Overbuild Risks

BofA analysts marked yesterday's stock market selloff as the "end of the cutting season," signaling a shift in focus to potential 2025 risks, particularly in sectors with heavy capital expenditures and uncertain returns. Among the most scrutinized is Meta Platforms Inc. (META), which has embarked on a $30 billion bond sale—the largest in its history—to fund its AI infrastructure expansion, according to Marketscreener. This move follows a $27 billion partnership with Blue Owl Capital to finance the Hyperion data center in Louisiana, a project that has redefined how hyperscalers secure capital by leveraging special-purpose vehicles (SPVs) and off-balance-sheet financing, as reported by Fortune. The strategy, while innovative, raises questions about long-term profitability as Meta allocates tens of billions to AI compute capacity amid rising costs and regulatory scrutiny.

Meta's third-quarter earnings underscored these challenges: the company reported $51.2 billion in revenue, exceeding expectations, but net income plummeted 83% year-over-year to $2.7 billion due to a $15.9 billion one-time tax charge from the U.S. "One Big Beautiful Bill Act" and soaring AI-related capital expenditures, according to Vocal Media. Earnings per share fell short of estimates at $6.03, triggering a post-earnings stock drop. CEO Mark Zuckerberg emphasized the long-term vision, stating that AI investments would drive "novel capabilities" and future profitability, but CFO Susan Li acknowledged the "significant reduction" in U.S. federal tax payments would likely be reinvested in infrastructure, according to Inkl. Reality Labs, Meta's hardware division, posted a $4.4 billion loss, with no new Quest headset launch expected in 2026 to offset costs.

The SPV model, pioneered by Meta's Hyperion project, has drawn comparisons to the 1990s dark-fiber overbuild crisis, where underutilized capacity led to financial strain, as noted by Fortune. While analysts like Arthur D. Little's Sean McDevitt argue this structure allows companies to scale faster by accessing external capital, critics warn of risks if AI workloads fail to materialize. Meta's approach mirrors broader industry trends: Alphabet, Microsoft, and Amazon are projected to spend $400 billion on AI infrastructure this year alone.

Beyond tech, other sectors saw mixed news. India's government approved a record Rs 37,952 crore subsidy for phosphatic and potassic fertilizers, aiming to support farmers during the 2025-26 Rabi season, according to the Economic Times. Meanwhile, Paris Saint-Germain (PSG) reported a record €837 million turnover for the 2024-2025 season, driven by commercial revenue growth and merchandise sales, per Foot Africa.

BofA's warning highlights a broader market reckoning. While Meta's AI bets and SPV-driven expansion reflect tech's aggressive innovation, they also expose vulnerabilities in a landscape where near-term profitability is elusive. As 2025 progresses, investors will closely watch whether these strategies translate to sustained returns or exacerbate existing risks.