Meta's stock slide erases $215 billion in market value, as Wall Street pans 'runaway' AI spending

By Britney Nguyen

Meta's spending is hard to rationalize, some analysts say, as it's uncertain whether heavy investments in AI will generate compelling returns

Meta's stock saw its worst day in three years on Thursday.

Meta Platforms Inc. just raised the midpoint of its capital-spending forecast for the third time this year - spooking analysts and contributing to a hefty selloff of its shares Thursday.

Meta's stock (META) closed down 11.33% on the day - its worst one-day drop in three years, according to Dow Jones Market Data. The decline wiped $214.7 billion off of Meta's market capitalization and was the 10th-largest one-day drop by a U.S. company on record, according to Dow Jones Market Data, as well as Meta's second-largest one-day market-cap loss - eclipsed only by the $232 billion it shed on Feb. 3, 2022.

After the stock fell in after-hours trading Wednesday and into Thursday morning, some analysts drew parallels to previous spending plans by the company that weren't received well by Wall Street. The stock had plunged about 25% on Oct. 27, 2022 - also in the wake of spending concerns.

It's not just that Meta is spending more on artificial intelligence, but that it's also unclear whether the types of AI investments that Facebook's parent company is pursuing so aggressively will yield appropriate financial returns. That at least was the view of two analysts who downgraded the stock in the wake of Wednesday's results and earnings call.

"Significant investment in Superintelligence despite unknown revenue opportunity mirrors 2021/2022 metaverse spending," Oppenheimer analysts wrote, referring to Meta's recently formed Superintelligence Labs, which is focused on AI that promises to surpass human knowledge. After Wall Street panned its earlier metaverse spending plans, Meta went through a "year of efficiency" focused on cost cuts.

Meta is back to talking up big spending, and there's still "uncertainty" around the company's investments in AI, the Oppenheimer team said in a Wednesday note, while downgrading Meta's stock to perform from outperform. With Meta's after-hours stock drop Wednesday, its price accurately reflected the company's new risk-reward balance, the analysts said.

The tech giant narrowed its expectations for capital expenditures to between $70 billion and $72 billion for this year, which would be well above the $39 billion that Meta spent last year. The company added that capex dollar growth will likely be "noticeably larger" next year, mostly due to continued spending on its AI-infrastructure buildout.

Read: Meta takes a $16 billion tax hit and earnings miss by wide margin

Meta's implied capex and operating expenditures for the fourth quarter are both 7% higher than the Wall Street consensus, Oppenheimer noted. And the company's expectations for expenses to grow "significantly faster" in 2026, along with its view for capex dollar growth, puts Meta's numbers ahead of those of Wall Street, the analysts added.

In Oppenheimer's view, "investors will struggle to rationalize" Meta's price-to-earnings ratio "until there is visibility into 2027, as aggressive revenue growth [has been] offset by high spending." The analysts contrasted Meta's situation with that of Alphabet Inc. (GOOGL) (GOOG), which they said had "predictable earnings at a reasonable P/E." Meta and Alphabet shares are both trading at about 21 times their 2027 earnings estimates, but Google's search business "could outgrow Meta at some point" next year, they said.

See more: Alphabet earnings are out. Here are the numbers driving the stock higher.

Benchmark analysts also downgraded Meta's stock on Thursday, moving to a hold rating from a buy rating. Those analysts said that they expect Meta shares to be "rangebound at best until a sensible return case can be made for thus far runaway capex."

Despite the dominance of Meta's advertising business, the company "will need to justify returns" beyond that segment, the analysts wrote.

The Benchmark analysts said Meta's AI investments in other business areas, such as robotics and its Llama AI foundation models, "are less certain against fresh, comparably capitalized competition" from companies such as OpenAI, Google and Tesla Inc. (TSLA), as well as frontier AI labs.

Meta's stock was also likely reacting to a one-time income-tax charge that drove a large gap between what the company delivered on profit and what analysts were expecting. With the charge, Meta reported earnings per share of $1.05, compared with the $6.72 consensus among analysts on FactSet. Without the charge, Meta said its EPS would have been $7.25.

-Britney Nguyen

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10-30-25 1722ET