Meta Shares Jump 6%, Intensifying the Risk of a Short Squeeze

$Meta Platforms, Inc.(META)$   jumped another 6% Friday, compounding the risk of a short squeeze that sent bears retreating a day earlier when the company outlined plans to further monetize its huge spending in artificial intelligence infrastructure. 

Trading in borrowed shares that were sold short more than doubled to 2.95 million shares Thursday, when the stock jumped 4.7%. The latest daily short volume accounted for about 11.1% of the total number of shares that changed hands that day, higher than the 8.01% average. A short squeeze happens when traders who bet against a stock are forced to buy it back as the price rises. That buying pushes the price even higher.

According to a Reuters report, Meta's in-house Iris AI chip will enter mass production in September. Custom chips could cut data-center costs 35% by 2027, Deutsche Bank analyst Benjamin Black was quoted by MarketWatch as saying. Cost cuts matter because they protect profits when companies spend heavily.

Meta also plans to double data-center compute capacity to 14 gigawatts in 2027, from 7 gigawatts in 2026, the same Reuters report said. Investors first feared overspending, sending shares down Thursday morning. Sentiment reversed when analysts argued the spending enables new revenue from AI cloud services.

Meta launched Muse Spark 1.1, its first paid AI model for developers, according to CEO Mark Zuckerberg's post on Threads post yesterday. The move starts to monetize Meta's AI investment beyond ads. New revenue sources can offset heavy capital spending. Meta plans $125 billion to $145 billion in capital expenditures this year.

In the first two minutes of trading Friday, inflows into the stock outpaced outflows by $259.87 million, with buys far outpacing sell orders in all sizes. Block orders, which are big trades often made by funds, turned positive in early July after net outflows in June. That flip suggests large investors returned to Meta Platforms, META after a June dip.

After the rally that began yesterday, almost 90% of the shareholders now sit on gains. Profit ratio means the share of investors who bought below the current price. A high ratio often reduces selling pressure because fewer holders are underwater.

Support looks firm near $605, with resistance at $691, according to the snapshot above. Support is a price level where buyers tend to step in. Resistance is where sellers often emerge. The average cost basis for holders sits at $614, well below the current price of $666.97.

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