Meta’s Spending Spree Sends Shockwaves Through Wall Street

Meta Platforms (NASDAQ: META) shares plunged more than 11% on Thursday after the social media giant announced aggressive plans to increase spending on artificial intelligence infrastructure, reigniting investor concerns about profitability and capital discipline. The selloff wiped out more than $200 billion in market capitalization, making it one of Meta’s sharpest post-earnings declines in recent years.

CEO Mark Zuckerberg defended the spending escalation, arguing that the company’s AI ambitions require long-term investment in computing capacity to meet both internal and external demand. “We build infrastructure with aggressive assumptions, and the demand keeps growing,” he told analysts. “If we overbuild, we can absorb it in the future.”

That reassurance, however, did little to calm markets already on edge about ballooning costs. Analysts viewed the remarks as a signal that Meta’s capital expenditures could continue to expand well beyond current levels, potentially pressuring free cash flow and profitability into next year.

Analysts Cut Targets but Keep Faith in the Long Term

Major investment banks reacted swiftly. BofA Global Research, TD Cowen, and KeyBanc Capital Markets all trimmed their price targets to a range between $810 and $875, while maintaining Buy or Overweight ratings. Even bullish firms such as Goldman Sachs and Morgan Stanley acknowledged that near-term sentiment could remain weak amid uncertainty over Meta’s spending trajectory.

Despite the selloff, several analysts noted that Meta’s AI-powered advertising tools—now generating an annual run rate of $60 billion—demonstrate tangible returns on these investments. “Meta continues to be one of the few companies monetizing AI at scale,” said one market strategist at Jefferies. “The concern isn’t demand—it’s pacing and capital efficiency.”

Still, skepticism lingers. Forrester Research’s Mike Proulx said in a client note that Meta’s strong top-line growth “is tainted by significantly increased costs across the board,” adding that the company’s Reality Labs division remains a major drag, having posted another $4 billion quarterly loss.

Balancing Innovation and Investor Patience

Meta’s long-term bet on AI infrastructure echoes the strategic playbook that once powered its transformation into a digital advertising powerhouse. However, with the company already outspending many of its peers, some investors fear it may be entering a cycle of diminishing returns.

The company’s year-to-date stock gain—15% compared with the S&P 500’s 16%—now looks precarious as investors rotate toward companies with leaner balance sheets and more predictable earnings. Meta’s continued investment in Reality Labs, coupled with elevated depreciation from data center expansion, has also fueled concern that its operating margins could compress further in the coming quarters.

Zuckerberg remains undeterred. “Almost every week, we’re approached by outside organizations seeking access to our compute capabilities,” he said. “If we overbuild, it simply means we’re early.”

Market strategists argue that Meta’s success now depends on execution—specifically, how efficiently it can scale AI-driven products without jeopardizing shareholder returns. “Meta’s at a crossroads,” said an analyst at Evercore ISI. “The company is betting that its infrastructure will become the backbone of next-generation AI, but Wall Street wants to see discipline before conviction returns.”

Looking Ahead

Meta’s next earnings cycle will likely serve as a critical test of investor confidence. With its AI ad systems showing early promise but its Reality Labs division deepening losses, the company faces a delicate balance between innovation and cost containment.

For now, the Street appears split: long-term believers see Meta as a future AI infrastructure leader, while skeptics warn of an “AI bubble” reminiscent of the company’s ill-fated metaverse pivot. The next few quarters may determine which narrative prevails—and whether Zuckerberg’s ambitious bet will ultimately justify the cost.