Meta AI’s spending plan caused the stock price to plummet

Meta AI’s spending plan caused the stock price to plummet

Shares in Meta – the owner of Facebook, WhatsApp and Instagram – fell sharply after it announced higher-than-expected spending on artificial intelligence (AI).

They fell more than 15% in after-hours trading in New York even as the tech giant revealed strong earnings figures.

Boss Mark Zuckerberg says it will take some time before big AI investments boost revenue.

Meta also said its X rival, Threads, now has more than 150 million monthly active users, increasing pressure on Elon Musk’s platform.

“Thread is on its way to beating X by becoming the alternative Twitter users and advertisers crave,” said Mike Proulx, of Forrester analysts.

He also said Meta stands to profit from the possible sale or ban of TikTok in the US – a development the app has vowed to fight.

AI features
Meta has updated its ad buying product with AI tools to boost revenue growth.

It has also introduced more AI features on its social media platforms such as chat assistants.

The firm said it now expects to spend between $35bn and $40bn, (£28bn-32bn) in 2024, up from an earlier forecast of $30-$37bn.

For investors, that outweighed the positive news on earnings.

First-quarter revenue rose 27% to $36.46bn, while analysts had expected revenue of $36.16bn.

Analysts though say there is logic to Meta’s approach.

Sophie Lund-Yates, of Hargreaves Lansdown, said Meta’s “huge investment” in AI had helped it get people to spend time on its platform, so advertisers were willing to spend more money “at a time when digital advertising uncertainty is still rife”.

More than 50 countries will hold elections this year, he said, “which greatly increases uncertainty” and could scare off advertisers.

Ms Lund-Yates said that “looking further ahead, the biggest risk [for Meta] remains regulation”.

Last year, Meta was fined €1.2bn (£1bn) by Irish data authorities for mishandling people’s data when moving it between Europe and the US.

And in February this year, Meta chief executive Mark Zuckerberg faced harsh criticism from US lawmakers and was urged to apologize to the families of victims of child sexual exploitation.

Ms Lund-Yates added that the firm had “more than enough resources to face legal challenges, but that does not rule out the risk of ups and downs in market sentiment”.