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Meta shares plunge as investors lose patience with Zuckerberg's AI strategy
🇦🇹 Austria /Technology

Meta shares plunge as investors lose patience with Zuckerberg's AI strategy

From Die Presse · () German

Translated from German, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Meta's stock price dropped significantly after the company reported a 28% increase in revenue but a 55% rise in investment spending.
  • Investors reacted negatively to the high costs associated with artificial intelligence development, which also led to an 8% decrease in operating profit and a 14% drop in net profit.
  • Despite strong core business growth, including a 3% increase in daily active users across its platforms, Meta's significant investments in AI and the past failure of its Metaverse initiative have raised concerns among investors.

Meta's stock experienced a sharp decline as investors grew impatient with CEO Mark Zuckerberg's ambitious artificial intelligence strategy. While the AI boom continues, the euphoria surrounding tech stocks has waned, with Meta following Alphabet and Tesla in seeing its share price fall after releasing its latest financial results.

Despite reporting a robust 28% increase in revenue, reaching $60.8 billion, Meta's stock plummeted by over nine percent. The primary driver for this sell-off was a staggering 55% surge in investment expenditures. These costs, largely driven by the company's push into AI, outpaced revenue growth, consequently shrinking operating profit by 8% and net profit by 14%. Zuckerberg attempted to reassure investors, stating, "My personal bet is that the people who invest here now will be rewarded over time and feel very good about it." However, this vague promise did little to appease market concerns, especially as Meta's free cash flow plummeted by 91% to $784 million.

The company now anticipates even higher total investment spending for the year, projecting between $130 billion and $145 billion, up from previous estimates. These funds are essential for acquiring the servers and data centers required to train new AI models. Meanwhile, Meta's core business remains strong, with daily active users across its platforms, Facebook, Instagram, WhatsApp, Messenger, and Threads, increasing by 3% year-over-year to 3.6 billion. Users also consumed 14% more advertising, and the company managed to raise ad prices by 12%.

However, the significant capital allocation towards AI, coupled with the notable failure of the Metaverse initiative, which accounted for less than 1% of revenue and incurred $4.6 billion in operating losses last quarter, has cast a shadow over Meta's future prospects. Investors seeking stable returns are reportedly looking towards companies like Johnson & Johnson or Procter & Gamble, which prioritize shareholder dividends over speculative AI ventures. Meta's stock has previously demonstrated volatility, having fallen 77% between 2021 and 2022, indicating a pattern of significant market swings.

My personal bet is that the people who invest here now will be rewarded over time and feel very good about it.

— Mark ZuckerbergZuckerberg attempts to reassure investors about the long-term value of AI investments.
DistantNews Editorial

Originally published by Die Presse in German. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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