Investors reject Meta's $145bn AI spend as cash flow collapses
Meta's stock tumbled after the company raised its AI capital expenditure forecast to as much as $145 billion, signaling that Wall Street's tolerance for massive tech spending without immediate returns is fading.
Meta shares plunged on Wednesday after the social media giant raised its annual capital expenditure forecast to between $130 billion and $145 billion, up sharply from the $125 billion estimate provided just three months ago.
The massive spending commitments took an immediate toll on the company's balance sheet. Meta posted free cash flow of just $784 million for the quarter, marking the lowest level for that metric in at least five years.
This selloff underscores a growing impatience among investors who are demanding tangible financial returns from the artificial intelligence boom rather than just promises of future dominance. The reaction mirrors the market's response to Alphabet's Google last week, which also saw its stock tumble after reporting record-low leftover cash.
Chief executive Mark Zuckerberg defended the outlays, arguing the investment is "accelerating every part of our core business." He pointed to increased user engagement on Facebook and Instagram, alongside improved advertising tools for smaller businesses.
To bridge the gap between current costs and future revenues, Meta outlined plans to sell its AI models and computing tools to external businesses. Zuckerberg indicated the initial step is making its Muse Spark AI model "easier for companies to integrate."
This represents a notable strategic pivot for a company that has historically relied almost entirely on consumer advertising. Zuckerberg acknowledged the move flexes "a different muscle than we've historically had," but argued the financial opportunity is too large to ignore.
"It's not just about selling compute; it's the API services and the productivity services and I think there is a very, very large opportunity there and we're quite focused on that," he said.
Beyond enterprise software, Zuckerberg highlighted the development of autonomous AI agents as the next major product category. "Soon, we'll have agents that can work 24/7 on your behalf," he said, adding that "great personal agents need to just work out of the box."
Chief financial officer Susan Li told financial analysts that these new commercial lines would eventually drive returns on the company's AI investments. "By 2028, we'll have turned over a lot of cards," she said.
For now, however, Zuckerberg is asking shareholders to accept the short-term cash squeeze. "I get that this is a big bet across the industry," he said. "My personal bet is that the people who invest in this will feel very good and be rewarded over time."
