Meta Shares Plunge As AI Push Spooks Investors

• Meta shares plunged as much as 15% in premarket trading, dragging US futures lower.
• Investors weren’t convinced by Mark Zuckerberg’s plan to keep spending tens of billions on AI.
• Meta also posted lackluster revenue guidance as part of its first-quarter earnings report.

Meta stock plunged in premarket trading on Thursday as investors fretted that Mark Zuckerberg’s artificial intelligence push will send costs skyrocketing.

Shares fell as much as 15% and were still 13% lower at just over $430 shortly after 5 a.m. ET in a selloff that will wipe about $160 billion off Meta’s value if it holds up until the opening bell. 

The losses came after Meta reported its earnings for the first three months of the year on Wednesday.

Its profits of $4.71 per share and revenue of $36.5 billion beat analysts polled by Refinitiv had expected, but lackluster guidance took some of the shine off those results.

Meta expects to make between $36.5 billion and $39 billion in revenue in the current quarter. The midpoint would fall short of the $38.3 billion figure that analysts had been forecasting.

In a post-earnings conference call, Zuckerberg outlined plans to invest more in AI. Meta said it was raising its expected capital expenditure for 2024 to between $35 billion and $40 billion “to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap.”

Zuckerberg’s previous pledge to keep costs low during a “year of efficiency” has helped Meta’s stock to rally since the start of 2023. Shares have climbed 107% over the past 12 months, and 42% this year at Wednesday’s close.

“An exceptional run for Meta’s shares has come to a shuddering halt based on stock trading which followed the company’s first quarter earnings update,” said Russ Mould, investment director at AJ Bell. “The key sticking point for investors seems to be the big increase in capex spending on artificial intelligence.”

“Previous concerns about a lack of discipline from Mark Zuckerberg have been reawakened, undoing some of the hard work the company has done to convince the market it has a tight rein on the purse strings,” he added.

Meta’s losses looked set to drag on broader indexes Thursday, with S&P 500 futures dropping 0.5% and futures for the tech-heavy Nasdaq 100 tumbling 0.9%.

Fellow “Magnificent Seven” companies Microsoft and Alphabet are set to post first-quarter earnings after the closing bell, while the Bureau of Economic Analysis is expected to release advance US GDP estimates for the three months to March 31.