Meta Platforms stock plunged and the company lost billions of dollars in value as investors rushed to sell shares on Thursday after the tech giant shocked investors with plans to spend even more aggressively on artificial intelligence.
Meta stock dropped 10.56% to $441.38 following the company’s results late Wednesday, its largest decrease since Oct. 27, 2022. The company lost $132.2 billion in market capitalization, closing Thursday with a $1.12 trillion valuation.
“The stock has had a strong run until reporting first-quarter results, which likely boosted investor expectations going into first quarter reporting, in our view,” Ralph Schackart, an analyst at William Blair, wrote in a note.
While Meta beat Wall Street’s expectations for first-quarter profit and revenue, it disappointed investors with its outlook for the second quarter, forecasting revenue in a range that was slightly shy of the analyst consensus.
Since advertising remains a core revenue driver for Meta, the weaker revenue guidance could be weighing on other ad-driven internet companies. Shares in Snapchat owner Snap fell 4.4% in the premarket session while Pinterest stock was down 4.3%.
But the bigger shocker was the big spending plans for AI, as Meta raised its forecast for full-year capital expenditures to a range of $35 billion to $40 billion, up from a prior range of $30 billion to $37 billion.
Higher spending comes “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta said in its earnings release. The parent of Facebook and Instagram added that capex likely would continue to increase in 2025 “as we invest aggressively to support our ambitious AI research and product development efforts.”
Despite a stark fall in Meta stock, Wall Street’s reaction has been fairly optimistic, with many analysts reiterating their bullish case for the company even as some trimmed price targets on the shares.
“While shares declined in the after hours on the elevated investments as well as likely some hope for higher revenue guidance, we remain positive given our expectation for continued solid ad growth, engagement strength, and option value with AI investments,” Seaport Research analyst Aaron Kessler wrote in a note. Seaport rates Meta stock at Buy but trimmed its price target on the shares to $500 from $510.
This isn’t the first time that Meta stock has fallen dramatically on the back of revenue worries and plans to spend big on a hot tech trend.
In October 2022, when the stock plunged 25% following weaker revenue and aggressive spending projects focused on the metaverse and virtual reality. With Meta stock up some 140% over the past year, however, Thursday ushered in the company’s second-largest one-day loss in market capitalization.
“AI is not the metaverse,” KeyBanc Capital Markets analyst Justin Patterson wrote in a note. “While we are not sure when we will see revenue from AI agents ramp, we are comfortable that Meta will be one of the few players in a solid position when the dust settles.” KeyBanc rates Meta at Outperform but lowered its price target to $475 from $555.
Declines in Meta stock will be felt keenly by CEO Mark Zuckerberg, whose position as the world’s fourth-richest man—with a fortune estimated at $175 billion—largely is a result of his 13% or so stake in Meta, according to the Bloomberg Billionaires Index. Zuckerberg, who has weathered much more volatile periods in Meta stock, is unlikely to be perturbed, with at least one analyst describing confidence in the company whose CEO has a high-profile mixed martial arts hobby.
“Meta’s handled every challenge that’s come their way—TikTok, privacy, cash burn—and come out the other side stronger, leaner, and prouder,” Bernstein analyst Mark Shmulik wrote in a note. “There’s a difference between defense and offense, where expectations are higher and uncertain. But offensive is more fun, isn’t it? We’re buyers.” Bernstein rates Meta at Outperform with a $565 target price on the stock.
“Meta’s earnings were always going to be a key event for financial markets, they are the first of the mega cap tech stocks to report results,” Kathleen Brooks, an analyst at broker XTB, wrote in a note. “When Mark Zuckerberg attempted to justify the increased spend, it merely sent the stock price lower.”