Meta's Stock Values are Declining: AI Investment is Being Discussed

Meta Platforms, Inc. (META) shares experienced a significant drop after the third-quarter earnings report. The company announced that it would increase investments in artificial intelligence this year and in 2026, resulting in a decline of more than 11% in its stock price.

CEO Mark Zuckerberg stated that they will increase spending to keep up with the demand for artificial intelligence. However, he emphasized that if they create excessive capacity, this additional processing capacity could be utilized in the future. "In this model we have always seen, we are building a certain infrastructure based on ambitious assumptions. However, there is a constantly increasing demand, and particularly in the core business area, there is a growing need for processing," said Zuckerberg.

Zuckerberg also expressed, "If we go overboard in this matter, we will have already created the capacity we will need in the future. However, this means we have to deal with some losses and value declines," reflecting the situation.

These statements were not the desired message on Wall Street. Many bank analysts lowered their price targets for Meta's stock. BofA Global Research analyst Justin Post lowered his price target from $900 to $810 but maintained his buy rating. Justin Patterson from KeyBanc Capital Markets also adjusted his price target from $905 to $875, but he kept both of his ratings.

TD Cowen analyst John Blackledge decreased the target price from $875 to $810 while maintaining his buy rating. Analysts from Morgan Stanley, Goldman Sachs, and Citi also lowered their price targets, but overall ratings remained either buy or overweight.

On the other hand, not everyone made a negative assessment. Analysts like Nicolas Cote-Colisson from HSBC and Scott Devitt from Wedbush continued to hold their price targets at $905.

Another significant development for Meta was Zuckerberg's mention that artificial intelligence-focused advertising tools have reached an annual revenue run rate of $60 billion. However, this did not change the perception of excessive spending. The company reported another $4 billion loss related to its Reality Labs division.

Mike Proulx, senior vice president and research director at Forrester, stated, "Unfortunately, Meta's third quarter is overshadowed by significantly increasing costs across all areas despite this strong revenue and user growth." He added, "Meta's Reality Labs continues its streak of losses and shows no signs of slowing down."

With these latest results, the company's shares lagged behind the broad S&P 500 index. Shares have risen 15% year-to-date and 14% over the past 12 months. During this period, the S&P 500 has seen a 16% increase year-to-date and an 18% gain over the past 12 months.