New York, NY – Shares of Meta, the parent company of popular social media platforms Facebook, WhatsApp, and Instagram, took a significant hit after the company revealed plans for increased spending on artificial intelligence (AI). Despite reporting strong earnings, the stock plummeted by more than 15% in after-hours trading in New York. CEO Mark Zuckerberg acknowledged that the substantial investment in AI may take some time to translate into increased revenues for the tech giant.
The company also announced that its messaging app competitor, Threads, has surpassed 150 million monthly active users, putting pressure on Elon Musk’s platform, X. Analysts like Mike Proulx of Forrester are optimistic about Threads’ potential, claiming it is on track to outperform X as the desired alternative for users and advertisers in the social media space.
Meta has been actively incorporating AI tools into its ad-buying products to drive revenue growth and introducing various AI features across its platforms, including chat assistants. The company now anticipates spending between $35 billion and $40 billion in 2024 on AI initiatives, an increase from its previous forecast of $30-$37 billion. Despite positive first-quarter revenue results, the market was more focused on the implications of Meta’s increased spending on AI.
Sophie Lund-Yates of Hargreaves Lansdown commended Meta for its significant investment in AI, noting that it has successfully attracted users to its platforms and increased advertiser spending. This strategic move comes amid a period of digital advertising uncertainty, especially with over 50 countries scheduled to hold elections this year. Lund-Yates emphasized that regulatory challenges remain a significant risk for Meta, particularly following CEO Mark Zuckerberg’s recent controversies over content moderation policies.
Looking ahead, investors will closely monitor how Meta navigates regulatory hurdles and market sentiment fluctuations. While the company has the resources to address legal challenges, the evolving landscape of digital advertising and the scrutiny on social media platforms pose ongoing risks for Meta’s future performance.