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Almost $200bn wiped off Meta's value as markets balk at Zuckerberg's AI spending plans

Almost $200 billion was wiped off of Facebook and Instagram owner Meta’s market cap today, as the firm’s AI spending plans alarmed investors (AFP via Getty Images)
Almost $200 billion was wiped off of Facebook and Instagram owner Meta’s market cap today, as the firm’s AI spending plans alarmed investors (AFP via Getty Images)

Almost $200 billion was wiped off of Facebook and Instagram owner Meta’s market cap today, as the firm’s AI spending plans alarmed investors.

The social media giant reported its first quarter results last night, after US markets closed. Its results for the three-month period beat expectations, but traders looked past those strong numbers and focussed on forward spending guidance.

The business founded by Mark Zuckerberg forecast capital expenditure between $35 billion and $40 billion, with much of the spend on AI. Zuckerberg’s comments on an earnings call, where he said the length of the AI investment cycle is two years, failed to calm markets.

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Kathleen Brooks, research director at XTB, said said: “If it was a dinner party then AI would have been the only dish on offer, which seemed to irate the market more. Going into the earnings call, the market wanted some colour on a couple of things, including any positive impact on Meta’s future earnings from the TikTok ban. However, Meta execs were tight lipped on this.”

The shares plunged by 15.4% to $417, after huge gains earlier this year. Even with the fall, the shares are still up 20% for the year.

Deutsche Bank said: “All this led to what was in many ways a mirror image of the reaction to Tesla’s results the day before, with Meta’s outlook disappointing relative to lofty expectations that had seen its shares rise 39.4% year-to-date.”

The share price fall means that Meta’s market value is now $1.06 trillion, a decline of  almost $200 billion in a single day. The amount wiped off the social media giant’s share price is more than the entire market value of Shell, the UK’s most valuable company.

The sell-off extended to many other US tech stocks. The tech-heavy Nasdaq Composite was down 2.2% in early trading . After surging to start the year, the Nasdaq is down about 6% over the past two weeks.