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Up to this point, Meta Platforms (NASDAQ: META) has failed to thoroughly convince markets that its artificial intelligence (AI) spending will pay off long-term.

Meta shares are down more than 15% over the past 52 weeks. This contrasts greatly with the sentiment and return of another key Magnificent Seven player: Alphabet (NASDAQ: GOOGL). Alphabet shares have doubled in value over the same period, with the firm showing accelerating growth in its cloud segment.

Amid its success, Alphabet just made a significant announcement. The company said it would raise $84.75 billion through a share issuance program as it looks to further scale its AI capacity. Even with Alphabet’s demonstrated AI strength, investors didn’t react kindly to the news.

Recent reports say that Meta could follow Alphabet’s equity issuance footsteps. Given this, it is worth examining what an equity raise could mean for the company and investors.

Meta Reportedly Considers Large Equity Raise After Alphabet’s Big Announcement

Notably, Alphabet shares fell by 4% on the day it announced its funding move, even while the S&P 500 rose slightly. Alphabet’s originally planned equity raise of $80 billion represented around 1.8% shareholder dilution. That figure ticks up very slightly to around 1.9% when considering its upsized $84.75 billion offering.

Overall, this is a relatively minimal amount of dilution, but the market’s reaction was still reasonable. At the end of the day, the raise means that each pre-existing shareholder will own less of the company, all else being equal.

Days later, reports emerged surrounding Meta’s potential equity raise. Reports state that the company is mulling a stock offering valued at “tens of billions of dollars” that will go toward funding its AI strategy. While far from a concrete number, this indicates a significant potential funding round, and thereby shareholder dilution. Still, this move is not set in stone whatsoever, with reports noting that it is “premature” to say Meta has reached a final decision.

A Potential Meta Equity Raise: More Dilution for Less Cash

Nonetheless, it is worth considering the extent to which Meta would need to dilute shareholders to raise tens of billions of dollars. The midpoint of Meta’s 2026 CapEx guidance is $135 billion, or approximately 73% of Alphabet’s midpoint CapEx guidance of $185 billion. Given that a potential Meta equity raise would go toward CapEx, it’s not unreasonable to anchor the value of that raise to 73% of Alphabet’s raise. Doing so would imply an equity raise of around $62 billion (73% of $84.75 billion). With a market capitalization of nearly $1.45 trillion, a $62 billion equity raise would lead to dilution of around 4.3%.

Thus, in order to raise $62 billion, or around $23 billion less than Alphabet, Meta would have to dilute shareholders more than twice as much. This shows how a potential Meta equity raise could be significantly less favorable to shareholders in comparison to Alphabet. Given this dynamic, it is possible that Meta shares could see a larger drop than Alphabet did if a raise became a reality. When comparing the outlooks of these two stocks, this is something investors should consider.

This is even more significant when thinking about a longer timeline. If hyperscaler equity raises were to become increasingly common, Meta’s relative disadvantage when it comes to dilution could compound over time.

Equity Raise Positives: Potential Funding Source for AI Products

On the other hand, it is worth thinking about the potential positives of a Meta equity raise. Up to this point, Meta has yet to release swaths of AI products. Most of its AI compute has centered on optimizing its advertising business across Facebook, Instagram, and WhatsApp. The company has clearly been successful in this. In Q1 2026, Meta’s revenue rose 33% year over year, its highest growth rate since 2021.

However, investors still want to see more out of Meta when it comes to AI offerings. Notably, it has been only two months since Meta unveiled Muse Spark, its latest AI model. Muse Spark is considerably more intelligent than Meta’s past LLaMa models, and although not a "frontier" model, Meta believes Muse Spark is competitive.

Putting a competitive AI model under its belt is an important prerequisite to releasing AI products that gain traction. All this is to say that, with Muse Spark still very new, it's fair to think Meta has meaningful AI products in its pipeline.

As Meta pursues such products, an equity raise would be a legitimate way to fund the growth of those products. In turn, Meta could assuage the concerns that have hurt its share price by creating new AI revenue streams.

Overall, while shareholder dilution is far from ideal, the payoff could be significantly greater in the long run.

Amid this, another factor to consider is Meta’s valuation. The stock currently trades at a forward price-to-earnings (P/E) ratio of around 19x. This is very close to its lowest level over the past three years and well below its three-year average near 23x.

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