Wall Street Reacts as Meta Announces Ways It Will Be Draining Funds on AI Projects

Most part of Meta’s earnings call session was focused on the ways how the company will spend money, which was not taken well by investors. Mark Zuckerberg started the session with his confidence and ambitions of artificial intelligence, and then he slowly shifted his talk to the metaverse and puffed his company’s operating system, its new headset, and smart glasses.

Zuckerberg focuses on AI plans

Well, investors were looking for revenue generation, but they found ways how the cash will slip so Meta stock started falling and went as low as 19% yesterday, erasing a little more than $200 billion from the company’s market cap. The stocks fell even though Meta beat expectations, however, investors wanted more, and the company did not live up to Wall Street’s expectations.

Zuckerberg seemed to be expecting the dumping and recalled the metaverse-inflicted offloading and also investments in Reels and Stories. He said,

“I think it’s worth calling that out, that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it.”

Source: CNBC.

He mentioned ads, but in plans for the future about how his company can incorporate them into the products that they are investing in now to generate revenues, despite the fact that Meta’s revenue generation model is based on ad performance, and they get their 98% revenue from this same channel.

Meta is under pressure again after a year of regaining investors’ confidence

2022 was a tough year for Meta, when metaverse spending and lighter revenues freaked investors out and it took a big bite out of the company’s value. But last year, the company came back into Wall Street’s good books again as it saw a three-fold increase in its stock and was 40% up this year, the highest it reached was $527 earlier this month. 

The company’s downsizing of its staff and closing of projects that were not important played a good role in gaining investors’ confidence, which was part of Zuckerberg’s cost-cutting strategy that he initiated at the start of 2023, when he announced it to be the “year of efficiency.” The CEO repeated that his efficiency policy will continue but will also shift resources to investments in AI.

Capital expenditures forecast was increased by almost $3 billion to $5 billion, as they are now expected to be between $35 billion to $40 billion, which were previously expected to remain under $37 billion as the company is increasing its investment in infrastructure to facilitate its AI projects.

Zuckerberg told investors that they would have to be patient for better rewards. He mentioned their previous investments that proved good for the long term, he said that building AI on scale is also a larger undertaking, and it will take time but provide better returns in the end.

The original story can be seen here.