Meta Plunges Over 11% as AI Spending Spree Extends Through 2026
Wall Street delivers brutal verdict on Meta's artificial intelligence ambitions.
The Price of Progress
Meta shares cratered more than 11% following the company's announcement of aggressive AI investment plans stretching into 2026. Investors balked at the projected spending timeline, sending the stock into freefall during after-hours trading.
Digital Arms Race
The social media giant joins the tech sector's frantic AI gold rush, committing billions to infrastructure and research. Internal projections show capital expenditures accelerating through next year, with peak spending expected in 2026.
Reality Check
Analysts question whether AI returns can justify the massive outlay. "Another case of tech executives playing with shareholder money like it's venture capital," noted one portfolio manager, capturing the Street's skeptical mood.
Meta bets the house on silicon brains while Wall Street counts the cost.
Wall Street cuts targets
That explanation was not enough to settle the market. The idea of building now and hoping the need catches up later sounded like costs first, benefits later, and the Street is allergic to that. Analysts started moving price targets down almost instantly.
BofA Global Research’s Justin Post cut Meta’s price target from $900 to $810, though he kept a Buy rating. KeyBanc’s Justin Patterson lowered his target from $905 to $875, holding Overweight.
TD Cowen’s John Blackledge brought his target down from $875 to $810, also keeping Buy. Morgan Stanley’s Brian Nowak, Goldman Sachs’ Eric Sheridan, Citi’s RON Josey, and Cantor Fitzgerald’s Deepak Mathivanan all lowered targets too, while maintaining either Buy or Overweight positions.
Translation: they still think Meta has value long term, but the near-term financial pressure is real.
Not every analyst turned, though. HSBC’s Nicolas Cote-Colisson held his target at $905, and Wedbush’s Scott Devitt also left his target unchanged.
Rising AI costs and Reality Labs losses weigh on the stock
The company did share a bright figure: Meta’s AI-powered advertising tools now have an annual run rate of $60 billion.
So the AI investments are doing something. But that number did not override concerns about spending going up too fast.
The Reality Labs segment added more pressure. Meta reported another $4 billion loss from Reality Labs. That division continues to operate at a loss, and there are no signs of it slowing down.
Forrester’s vice president and research director, Mike Proulx said, “Unfortunately, Meta’s strong revenue and user growth in Q3 is tainted by significantly increased costs across the board.” He added, “True to form, Meta’s Reality Labs continued its streak of losses with no signs of slowing down.”
Meta’s stock is now trailing the S&P 500. Meta shares are up 15% year to date and 14% in the past 12 months. The S&P 500 is up 16% year to date and 18% over the past 12 months. Meta is still growing, but the pace is now behind the broader market.
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