Meta’s Big AI Spending Turns Off Investors

Meta Platforms may have just got kicked off Wall Street’s favorites list. Stock of the Facebook owner dropped 16% after CEO Mark Zuckerberg warned the company was entering a new investment cycle, this time in artificial intelligence, that would take a while to flow through to create “profitable services.” Zuckerberg’s comments hit a nerve: Investors have increasingly fretted about how AI developers will generate a return from their investments. But unlike Microsoft and Google, which are also pouring billions into AI, Meta hasn’t yet figured out how to generate revenue from the technology. 

Zuckerberg made a “trust me” pitch to investors, reminding analysts on tonight’s earnings call that Meta got a payoff from its past big investment cycles, including its transition to mobile and its introduction of TikTok competitor Reels. And he outlined lots of ways AI would help the business, such as simply getting more people to use its apps, which would drive more advertising, and persuading consumers to buy Meta’s smart glasses, which are now AI powered. But he and Chief Financial Officer Susan Li were vague about exactly when Meta will show meaningful revenue from AI, or what kind of a return the company will get on its investment in the tech.