Is Meta's stock in trouble? OpenAI's new app has Wall Street worried.

By Christine Ji

OpenAI's Sora app could fundamentally change the social-media landscape and leave Meta scrambling to catch up

Meta recently launched Vibes, an AI-generated short-form video app.

OpenAI's new short-form video app is putting Meta Platforms Inc. in the hot seat.

In the two weeks since its launch, Sora has rapidly surpassed 1 million downloads and shot to the top of the U.S. App Store, which some analysts are taking as a threat to Meta's (META) Instagram and Facebook.

In a Monday note, MoffettNathanson analyst Michael Nathanson maintained his buy rating on Meta but lowered his price target to $890 from $930, writing that Meta could be facing its own version of Alphabet Inc.'s (GOOGL) (GOOG) "ChatGPT moment" that led investors to question whether artificial-intelligence chatbots would replace Google Search.

Google has since proved to investors that its Search business and Gemini offering are competitive. But OpenAI may pose a more disruptive threat to the social-media ecosystem. Social-media apps are in a "zero-sum competition for leisure time," Nathanson wrote, with the losers facing potential obsolescence, as seen by the fate of MySpace and Vine.

If AI-generated content becomes the next big trend in social media, Meta will have to move quickly to fend off competition and remain relevant, Nathanson believes. Shares of Meta have fallen around 4% since the launch of Sora on Sept. 30.

"Any perceived threat to Meta's engagement flywheel, and by extension, its ad monetization momentum, could quickly weigh on sentiment," Nathanson wrote. "Should Meta's top line fall short of [Wall] Street expectations, we would expect a meaningful pullback in the stock."

Read: Google's Gemini now tops the App Store on Nano Banana frenzy. Is ChatGPT in trouble?

Meta hasn't been sitting idly by while OpenAI innovates. The company had already rolled out its own AI video-generation app, Vibes, prior to Sora's launch. Meta could build out Vibes to be a standalone competitor to Sora, or it could integrate Vibes into Instagram and Facebook, Nathanson wrote. However, he pointed out that Vibes lags behind Sora in technical ability, as users can't blend personal videos with AI-generated content, and as Meta depends on third-party models.

Meta doesn't face an immediate existential threat from Sora, Nathanson and other analysts say. Apps such as Snap Inc.'s (SNAP) SnapChat and TikTok have grown without cannibalizing Meta's market share. When Sora first launched, Morgan Stanley analyst Brian Nowak wrote in a note that he was skeptical of OpenAI's ability to "provide a substantially differentiated (and better) user experience" than those of incumbents.

But if social media does become increasingly dominated by AI-generated videos, Meta will be forced to partake in a costly buildout of its AI capabilities that would lead to a "near-term monetization drag" affecting revenue growth and operating margins, according to Nathanson.

Catching up to OpenAI's Sora "will require both time and significant incremental investment in infrastructure and model development," Nathanson wrote. Meta has already announced ambitious plans to significantly increase its data-center capacity. The company has also made several high-profile AI talent additions, most recently hiring Andrew Tulloch, co-founder of AI startup Thinking Machines, according to the Wall Street Journal.

Representatives from Meta did not immediately respond to a request for comment.

These investments have lead to increasing capital expenditures for Meta. Investors expect Meta's capex-to-revenue ratio to peak at 43% in 2026, much higher than the previous peak of 27% in 2022, when the company was monetizing Reels, according to MoffettNathanson.

Meta's pivot to AI is expected to be a longer and more expensive transition than previous product shifts, increasing the risk that investors could lose patience, Nathanson warned.

Read on: OpenAI wants to build a social-media business. Can its Sora app take on Meta and Google?

-Christine Ji

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10-13-25 2158ET