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Meta stock plunges 15% as company plans to invest heavily in artificial intelligence

Meta stock plunges 15% due to heavy AI investment plans overshadowing strong financial results, raising concerns about future growth.

Meta's stock took a significant hit, plummeting over 15% in extended trading following the company's announcement of ambitious investment plans in artificial intelligence. Despite posting better-than-expected first-quarter results with a 27% revenue increase to $28.65 billion and a doubling of net income to $12.37 billion, Meta's stock suffered due to a light sales forecast for the second quarter.

The company's decision to heavily invest in areas such as glasses and mixed reality, where they currently do not generate revenue, raised concerns among investors. CEO Mark Zuckerberg's emphasis on these investments during the earnings call contributed to the stock selloff.

Meta's shift in reporting metrics, moving away from daily and monthly active users to "family daily active people," revealed a 7% increase to 3.24 billion for March 2024. With heightened investor expectations following consistent financial growth in recent quarters, Meta faces pressure to deliver on its promises, especially after a remarkable stock performance in the past year.

Zuckerberg's focus on efficiency and streamlining operations led to a reduction in headcount by 10% in the first quarter, with capital expenditures for 2024 projected to increase to support the company's AI roadmap. Meta's emphasis on AI-driven advertising strategies has been instrumental in reclaiming market share and boosting ad revenue by 27% to $35.64 billion.

Despite the success in advertising, Meta's Reality Labs unit, responsible for developing the metaverse, continues to incur losses, with total losses exceeding $45 billion since 2020. The company's strategic investments in AI models and automated ad creation tools have been pivotal in driving growth, particularly as Chinese discount retailers increase ad spending on platforms like Facebook and Instagram.

As Meta navigates the evolving digital landscape, analysts remain cautious about potential challenges, such as slower spending from Chinese advertisers and ongoing losses in the Reality Labs unit. The company's commitment to innovation and AI-driven solutions will be critical in sustaining growth and adapting to changing market dynamics.

Executives will provide further insights on Meta's performance and future outlook during the upcoming analyst call, where discussions on investment strategies and operational efficiency are expected to take center stage.

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