Share Price Slumps as Meta AI Reveals Spending Plans

Meta, the conglomerate behind Facebook, WhatsApp, and Instagram, witnessed a significant drop in its stock value following its announcement of increased spending on artificial intelligence (AI).
During after-hours trading in New York, Meta’s shares plummeted by over 15%, despite the company reporting strong earnings figures. CEO Mark Zuckerberg acknowledged that it would take time for the substantial AI investment to yield increased revenues.
Moreover, Meta revealed that its rival platform, Threads, has surpassed 150 million monthly active users, intensifying competition in the social media sphere, particularly against Elon Musk’s platform.
Analysts from Forrester, including Mike Proulx, noted Threads’ potential to outpace its competitor by offering a coveted alternative to Twitter for users and advertisers. Additionally, Meta could benefit from TikTok’s uncertain fate in the US, which the app has vowed to contest.
Meta has been integrating AI tools into its ad-buying products to bolster earnings growth and enhancing AI features across its social media platforms, such as chat assistants. The company revised its projected spending for 2024 to between $35 billion and $40 billion, up from the previous estimate of $30 billion to $37 billion.
Despite Meta’s robust first-quarter revenue increase of 27% to $36.46 billion, surpassing analysts’ expectations, investors remained wary of the heightened AI spending. Analysts, however, reasoned that Meta’s AI investments have incentivized users to spend more time on its platforms, thereby increasing advertiser spending amid uncertainties in digital advertising, particularly during global elections.
Sophie Lund-Yates from Hargreaves Lansdown emphasized Meta’s substantial AI investment as instrumental in attracting platform users, thus boosting advertiser spending, despite heightened uncertainty in digital advertising due to numerous global elections.
Looking ahead, regulatory challenges pose the most significant risk for Meta. The company faced a €1.2 billion fine from Ireland’s data authorities for mishandling data transfers between Europe and the US. Moreover, Meta CEO Mark Zuckerberg faced criticism from US lawmakers and was compelled to apologize to families affected by child sexual exploitation.
Although Meta possesses ample resources to address legal challenges, Lund-Yates cautioned that market sentiment remains susceptible to fluctuations.
Source: bbc.com

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