Oct 22 (Reuters) – Shares of Meta Platforms fell more than 5% in early trading on Thursday, as investors weighed the benefits of the company’s fast-growing AI agent business against the mounting costs of funding its ambitious AI expansion.
As of Wednesday’s close, the stock had gained more than 5% this year. If current losses hold, Meta is set to shed about $85 billion in market value.
• The downbeat reaction comes despite Meta reporting stronger-than-expected quarterly revenue, forecasting fourth-quarter sales above Wall Street estimates and highlighting rapid adoption of its new AI agent app, Muse
• The earnings report came hours after a New Mexico judge ordered the company to pay a $25 billion penalty in a data-privacy case linked to Cambridge Analytica. Meta said it plans to appeal the ruling
• The Instagram parent is spending heavily to support its AI plans, with an expected annual capital expenditure forecast between $135 billion and $145 billion. It also reported a free cash flow deficit of $2.12 billion in the third quarter, compared with positive free cash flow a year earlier
• Deutsche Bank analyst Benjamin Black said Meta’s AI investments were generating stronger advertising performance and engagement, creating a “positive thesis creep” around the stock as investors increasingly view computing infrastructure as a revenue-generating asset rather than a cost burden
• Meta also announced plans to create a new class of non-voting Class C shares, giving the company additional flexibility for acquisitions and employee compensation while preserving CEO Mark Zuckerberg’s voting control
• At least 13 brokerages have raised their price targets on the stock after the results, according to data compiled by LSEG
• Concerns about the scale of Meta’s AI investments have also spilled into credit markets, with the cost of insuring the company’s debt against default widening to a record high
(Reporting by Prathik Jayaprakash in Bengaluru, additional reporting by Rashika Singh; Editing by Devika Syamnath)
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