Meta Platforms' AI Spending Triggers Stock Volatility
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 28 2026
0mins
Source: Fool
- Stock Decline: Meta Platforms' shares have fallen nearly 23% from their peak last August, primarily due to management's warning of a significant increase in capital expenditures, with projections of $125 billion to $145 billion for AI data centers this year, raising investor concerns about future profitability.
- Competitive Landscape: While Meta's spending on AI infrastructure is increasing, it faces higher investment risks compared to other tech giants like Amazon, Microsoft, and Alphabet, which benefit from strong revenue visibility and confidence in capital investment returns through their public cloud platforms, whereas Meta's capacity building serves only itself.
- Advertising Revenue Growth: Despite rising AI expenditures, Meta achieved a 33% year-over-year revenue growth in the most recent quarter, with increases in ad impressions and prices, indicating AI's potential to enhance user engagement and monetization, although rising operating expenses have pressured operating margins.
- Future Outlook: Meta plans to cut about 10% of its workforce to manage high costs associated with AI personnel and infrastructure, which may create a one-time hit but is expected to lead to rising operating income by 2026; in the long run, investments in AI are anticipated to enhance user engagement and advertising effectiveness, driving revenue growth.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 557.670
Low
655.15
Averages
824.71
High
1117
Current: 557.670
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Significant Valuation Advantage: With a P/E ratio of 20.5, Meta is undervalued compared to other Magnificent Seven stocks and the S&P 500's 32.2, indicating substantial rebound potential in the coming years as fundamentals remain strong.
- Diversification Strategy Progress: While online ads account for 98.4% of total revenue, Meta is diversifying into artificial intelligence, having launched its first AI model, with CEO Zuckerberg aiming to deliver personal superintelligence to billions, potentially opening new revenue streams.
- Long-Term Growth Catalysts: The high-margin nature of Meta's advertising business positions it well, and ongoing diversification efforts are expected to serve as long-term growth catalysts, even if other segments have limited short-term revenue impact.
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- Strong Advertising Business: Despite user growth trending towards low single digits, online advertising still constitutes 98.4% of total revenue, and the company has successfully increased average revenue per user, demonstrating its ongoing competitiveness in the high-margin advertising market.
- Diversification Strategy: Meta Platforms is expanding into artificial intelligence, having launched its first AI model, with CEO Mark Zuckerberg stating the company aims to deliver personal superintelligence to billions, which could introduce new revenue streams and enhance its market position.
- Long-Term Growth Potential: While advertising revenue remains dominant, Meta's diversification efforts serve as long-term catalysts that could potentially double its stock price in the future, similar to Alphabet's success story, attracting investor interest in its growth opportunities.
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- Price Target Increases: Rosenblatt raised Qualcomm's price target from $190 to $265 while reiterating its 'Buy' rating, calling the investor day a definitive turning point that indicates Qualcomm has moved past Apple-related headwinds.
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- New Business Venture: Qualcomm CFO Akash Palkhiwala announced the company's entry into the data center sector, aiming to build rack-scale infrastructure that supports AI accelerator chips, marking a significant shift from being a smartphone manufacturer to an edge device company.
- Revenue Targets Set: Qualcomm projects a revenue target of $5 billion for fiscal 2027 and $15 billion for fiscal 2029, indicating strong growth potential and technological leadership in this new market.
- Customer Partnerships: Qualcomm has established close collaborations with Meta and Microsoft, with Meta focusing on CPU product development and Microsoft engaging in high bandwidth compute architecture design, showcasing Qualcomm's influence and customer acceptance in the industry.
- Custom Chip Development: Qualcomm is developing custom ASICs for two hyperscale customers, each expected to generate over $1 billion in revenue in 2027, which will represent a new revenue growth avenue for the company, further solidifying its market position.
See More
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- Advertising Revenue Growth: Meta Platforms reported a 33% year-over-year increase in online advertising revenue and a 30% rise in operating income in Q1, demonstrating robust performance in its core business despite a more than 10% decline in stock price.
- Significant Valuation Advantage: With a P/E ratio of 20.5, Meta is undervalued compared to other Magnificent Seven stocks and the S&P 500's 32.2, indicating substantial rebound potential in the coming years as fundamentals remain strong.
- Diversification Strategy Progress: While online ads account for 98.4% of total revenue, Meta is diversifying into artificial intelligence, having launched its first AI model, with CEO Zuckerberg aiming to deliver personal superintelligence to billions, potentially opening new revenue streams.
- Long-Term Growth Catalysts: The high-margin nature of Meta's advertising business positions it well, and ongoing diversification efforts are expected to serve as long-term growth catalysts, even if other segments have limited short-term revenue impact.
See More
Meta Platforms' Low Valuation May Change by 2027
- Valuation Advantage: Meta Platforms trades at a P/E ratio of 20.5, lower than other Magnificent Seven stocks and the S&P 500's 32.2, while its Q1 revenue surged 33% year-over-year and operating income rose 30%, indicating that its stock is significantly undervalued and may not trade at this level again for several years.
- Strong Advertising Business: Despite user growth trending towards low single digits, online advertising still constitutes 98.4% of total revenue, and the company has successfully increased average revenue per user, demonstrating its ongoing competitiveness in the high-margin advertising market.
- Diversification Strategy: Meta Platforms is expanding into artificial intelligence, having launched its first AI model, with CEO Mark Zuckerberg stating the company aims to deliver personal superintelligence to billions, which could introduce new revenue streams and enhance its market position.
- Long-Term Growth Potential: While advertising revenue remains dominant, Meta's diversification efforts serve as long-term catalysts that could potentially double its stock price in the future, similar to Alphabet's success story, attracting investor interest in its growth opportunities.
See More
Mixed US Stock Performance as Tech Stocks Weigh Down Market
- Tech Stock Weakness: The US stock market is mixed as the performance of the 'Magnificent Seven' tech stocks weighs down overall market sentiment, with Apple (AAPL) leading losses by dropping over 4% due to price hikes on Macs and iPads to offset rising costs from memory chip shortages, potentially impacting its market share and consumer demand.
- Strong Economic Data: Recent US economic indicators show Q1 GDP revised up to 2.1%, surpassing expectations of 1.6%, while weekly initial jobless claims fell to 215,000, indicating a resilient labor market that may influence the Federal Reserve's monetary policy decisions moving forward.
- Declining Oil Prices: WTI crude oil prices fell over 1% to a four-month low, with Saudi Arabian ships heading to the key Ras Tanura terminal, signaling a potential restart of exports from the Persian Gulf, which could affect global oil prices and profitability in related sectors.
- Chipmakers Surge: Micron Technology (MU) forecasts Q4 revenue of $50 billion, significantly above the consensus of $43.24 billion, leading to a stock price increase of over 9%, reflecting strong demand in the artificial intelligence sector that may further boost the stock prices of related tech companies.
See More
Qualcomm Investor Day Sparks Market Optimism
- AI Data Center Sales Projection: Qualcomm's forecast of $5 billion in AI data center sales by fiscal 2027 positions it as a key beneficiary in the AI sector, although analysts caution that the three-year growth trajectory remains a 'show-me story'.
- Price Target Increases: Rosenblatt raised Qualcomm's price target from $190 to $265 while reiterating its 'Buy' rating, calling the investor day a definitive turning point that indicates Qualcomm has moved past Apple-related headwinds.
- Partnership Expansion: Qualcomm entered multi-generational agreements with Meta and Microsoft, with production of the high-performance Dragonfly C1000 data center CPUs expected to begin in the second half of 2028, aimed at reducing operating costs and improving energy efficiency.
- Revenue Guidance Update: Qualcomm anticipates automotive revenue of $10 billion, IoT revenue exceeding $14 billion, and data center revenue over $15 billion by fiscal 2029, reflecting the company's successful diversification strategy.
See More
Micron Technology Surpasses Expectations in Q3 Earnings Report
- Stellar Performance: Micron Technology reported Q3 revenue of $41.46 billion, a staggering 346% increase year-over-year, significantly exceeding analysts' expectations of $35.3 billion, highlighting the company's robust performance and sustained market demand in the semiconductor sector.
- Stock Surge: Following the earnings report, Micron's stock soared to $1,255 at 09:35 ET, briefly surpassing Tesla and Meta in market capitalization, reflecting strong investor confidence in the company's future growth prospects.
- Analyst Optimism: Deutsche Bank and DA Davidson both raised their price targets for Micron, with the former increasing its target from $1,500 to $1,550 and the latter from $1,500 to $2,000, indicating over 60% upside potential and showcasing market optimism regarding Micron's future earnings.
- Market Sentiment Shift: On the social platform Stocktwits, investor sentiment for Micron shifted from 'bullish' to 'extremely bullish', with the stock becoming the top trending ticker, indicating strong expectations for its market cap potentially reaching $2 trillion.
See More
Qualcomm Expands into AI Data Center Business
- New Business Venture: Qualcomm CFO Akash Palkhiwala announced the company's entry into the data center sector, aiming to build rack-scale infrastructure that supports AI accelerator chips, marking a significant shift from being a smartphone manufacturer to an edge device company.
- Revenue Targets Set: Qualcomm projects a revenue target of $5 billion for fiscal 2027 and $15 billion for fiscal 2029, indicating strong growth potential and technological leadership in this new market.
- Customer Partnerships: Qualcomm has established close collaborations with Meta and Microsoft, with Meta focusing on CPU product development and Microsoft engaging in high bandwidth compute architecture design, showcasing Qualcomm's influence and customer acceptance in the industry.
- Custom Chip Development: Qualcomm is developing custom ASICs for two hyperscale customers, each expected to generate over $1 billion in revenue in 2027, which will represent a new revenue growth avenue for the company, further solidifying its market position.
See More
