Meta and Microsoft Stocks Plunge Amid AI Investment Concerns
Shares of Meta and Microsoft experienced a significant drop on Thursday. This decline followed the announcement of their plans to boost investments in artificial intelligence, raising investor concerns about the potential returns on these expenditures.
The Nasdaq, heavily weighted with tech stocks, was down 1.3% by 3:30 p.m. ET. Worries that AI investments might be overblown were clearly affecting sentiment.
Meta Inc. shares had previously surged by about 11.5%. However, this increase seemed overshadowed by worries over the social media giant’s intention to raise its spending, despite a solid earnings report from the day before.
During a recent earnings call, CEO Mark Zuckerberg remarked, “It’s still early, but I think we’re beginning to see progress in our core business.” He expressed confidence, stating they should invest even more to avoid underinvestment.
The company’s forecast for capital expenditures climbed to between $70 billion and $72 billion for 2025, surpassing an earlier range of $66 billion to $72 billion.
Meta, which encompasses platforms like Facebook, Instagram, and WhatsApp, is already making substantial investments in future technologies. Earlier this year, it gained attention by acquiring a nearly $15 billion stake in the startup Scale AI and appointing 28-year-old CEO Alexander Wang to manage Meta’s Superintelligence Institute.
Other major tech firms are also heavily investing in AI and relevant infrastructure, which entails expensive and energy-intensive data centers that require significant up-front capital.
On the same day, Google parent Alphabet raised its spending forecast to $91 billion to $93 billion, indicating a similar trend across the industry.
Microsoft’s stock fell about 3.4% on Thursday following its announcement to further its investments in AI, despite facing a considerable revenue impact.
The company’s earnings report revealed a $3.1 billion decline in net income during the first quarter, primarily linked to its investment in OpenAI, the organization behind ChatGPT.
CEO Satya Nadella referred to the partnership with OpenAI as “one of the most successful partnerships and investments our industry has ever seen.” During the earnings call, he emphasized the mutual benefits resulting from their collaboration.
Microsoft initially invested in OpenAI back in 2019 and has since pledged around $13 billion. By the end of September, it had already contributed $11.6 billion, according to SEC records.
Overall, Microsoft’s total investment in OpenAI—about $135 billion—represents roughly 27% of the company’s stock.
In the meanwhile, Meta is reportedly on track to raise at least $25 billion through a bond sale, attracting approximately $125 billion in orders, which is noteworthy for exceeding prior records for such offers, as reported by various sources.
Citigroup and Morgan Stanley are said to be involved in this deal, but details from Morgan Stanley were not available, and both Citigroup and Meta did not respond immediately to inquiries.
