Meta, Microsoft shares plunge as investors fear AI spending is overhyped
Shares in Meta and Microsoft Plunge as Tech Giants Ramp Up AI Spending
Meta and Microsoft saw a significant drop in their stock prices on Thursday following announcements of increased spending on artificial intelligence. Investors expressed concerns that the investments may not yield significant returns.
The tech-heavy Nasdaq fell by 1.3% around 3:30 p.m. ET on Thursday amidst fears of overhyped artificial intelligence investments.
Meta’s stock plummeted by approximately 11.5% due to mounting worries about the social media giant’s plans to boost spending, overshadowing a strong earnings report from the previous day.
During the earnings call on Wednesday, CEO Mark Zuckerberg stated, “It’s pretty early, but I think we’re seeing the returns in the core business. That’s giving us a lot of confidence that we should be investing a lot more, and we want to make sure that we’re not underinvesting.”
The company revealed intentions to raise its 2025 capital expenditures to between $70 billion and $72 billion, surpassing the previous range of $66 billion to $72 billion.
Meta, which owns Facebook, Instagram, and WhatsApp, has already made substantial investments in AI. Earlier this year, it made headlines by acquiring a nearly $15 billion stake in Silicon Valley startup Scale AI.
Alphabet, the parent company of Google, also increased its spending forecast to $91 billion to $93 billion on Wednesday.
Microsoft experienced a 3.4% decrease in its stock price on Thursday after announcing continued heightened AI spending, despite a significant earnings hit. The company reported a $3.1 billion decrease in net income in the first quarter due to investments in OpenAI.
Microsoft CEO Satya Nadella emphasized the success of the company’s partnership with OpenAI, calling it “one of the most successful partnerships and investments our industry has ever seen.”
Meanwhile, Meta received orders worth around $125 billion for a potential bond sale, setting a record for the highest demand ever. The social media giant aims to raise at least $25 billion from the sale.
Citigroup and Morgan Stanley are reportedly involved in the bond sale deal.
