Meta stock dropped over 11% after announcing plans to boost AI spending through 2026

Meta’s stock dropped more than 11% by the close on Thursday after the company told investors during its third-quarter earnings report that it plans to increase spending on AI infrastructure for the rest of this year and throughout ￰0￱ reacted fast, and the stock sold off as soon as the plan was laid ￰1￱ move signaled higher costs ahead, and the market did not wait to see how it plays ￰2￱ Zuckerberg said the company is building more computing power to meet rising demand for AI tools across Meta’s core ￰3￱ said the company has seen this pattern ￰4￱ his words, “we build some amount of infrastructure to what we think is an aggressive assumption, and then we keep on having more demand to be able to use more compute, especially in the core business.” Mark admitted that the plan could go too ￰5￱ said, “I mean, it’s, of course, possible to overshoot that right?” If Meta ends up with extra unused compute, he said the company will “absorb” it and use it in the ￰6￱ to Mark, internal teams and outside partners already request access to Meta’s infrastructure for APIs and compute, so even excess capacity might be used over ￰7￱ Street cuts targets That explanation was not enough to settle the ￰8￱ idea of building now and hoping the need catches up later sounded like costs first, benefits later, and the Street is allergic to ￰9￱ started moving price targets down almost ￰10￱ 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 ￰11￱ Cowen’s John Blackledge brought his target down from $875 to $810, also keeping ￰12￱ 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 ￰13￱ every analyst turned, though. HSBC’s Nicolas Cote-Colisson held his target at $905, and Wedbush’s Scott Devitt also left his target ￰14￱ 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 ￰15￱ the AI investments are doing ￰16￱ that number did not override concerns about spending going up too ￰17￱ Reality Labs segment added more ￰18￱ reported another $4 billion loss from Reality ￰19￱ 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 ￰20￱ shares are up 15% year to date and 14% in the past 12 ￰21￱ S&P 500 is up 16% year to date and 18% over the past 12 ￰22￱ is still growing, but the pace is now behind the broader ￰23￱ your strategy with mentorship + daily ideas - 30 days free access to our trading program