Shares in Meta, the parent company of Facebook, WhatsApp, and Instagram, experienced a significant drop in premarket trading on Thursday. The stock plummeted by approximately 13%, putting nearly $163 billion of the company's market value at risk. This decline came as a result of Meta's announcement to 'invest aggressively' in artificial intelligence, which caused concern among investors.
Despite reporting a substantial increase in first-quarter profit and revenue, investors appeared apprehensive about the substantial costs associated with Meta's ambitious AI initiatives. The company revealed plans to invest up to $5 billion in AI projects, with the possibility of further increases in the coming years. This heightened level of investment raised uncertainties among shareholders.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, noted that the bold language used in Meta's spending plans might have contributed to the market's reaction. She emphasized the importance of Meta maintaining focus on its core advertising activities, as defending its digital advertising market share remains crucial.
Meta disclosed that its full-year capital expenditure is expected to range between $35-40 billion, surpassing the previous guidance of $30-37 billion. The company aims to accelerate infrastructure investments to support its AI research and product development endeavors.
In a statement, Meta acknowledged that capital expenditures would continue to rise in the following year as part of its aggressive investment strategy to bolster AI initiatives. The company remains committed to advancing its AI capabilities while ensuring the protection of its advertising business.
