Meta’s AI Investments Stir Investor Concerns Amid Metaverse Déjà Vu

Meta Platforms (META) is significantly increasing its investment in artificial intelligence (AI), raising eyebrows among investors. This influx of cash mirrors its previous spending on the metaverse, which also led to a notable drop in stock value.

AI Investments and Investor Concerns

According to reports, Meta plans to invest up to $72 billion in AI this year, with further investments projected for 2026. This bold strategy has resulted in a 17% decline in Meta’s stock price over the past four days. This marked a troubling trend for investors, reminiscent of past dips linked to the company’s aggressive spending on the metaverse.

Investor Sentiments

• Tiffany Wade from Columbia Threadneedle Investments expressed concerns over Meta’s spending habits, questioning the lack of clear evidence that these investments will yield profitable returns.
• Stefan Slowinski at BNP Paribas noted that Meta’s limited enterprise cloud business could hinder its ability to capitalize on AI demand directly.

Moreover, analysts point out that the majority of Meta’s revenue still comes from advertising, leaving its expansion into new business areas uncertain.

Future Growth and Stock Potential

Despite these challenges, analysts are optimistic about Meta’s revenue growth, forecasting an increase of 21% this year and continued strong expansion through 2028. The stock remains relatively affordable, trading at 19 times forward earnings, making it an attractive option for some investors.

Investment Opportunities

David Katz from Matrix Asset Advisors views the recent decline in stock prices as a potential buying opportunity. He believes that the AI sector offers clearer pathways to profitability compared to the metaverse.

Analyst Ratings

Overall, analysts maintain a Strong Buy consensus on META stock. In recent evaluations, 34 analysts rated it as a Buy, six as Hold, and one as Sell. The average price target for META stands at $843.56 per share, suggesting a possible upside of 32%.

As Meta continues to navigate this turbulent financial landscape while expanding its AI capabilities, investors are left weighing risks against the potential for significant returns.