Meta Platforms (NASDAQ: META) inventory has been struggling of late. It’s underperforming the market, which it additionally did final yr. While the corporate appears to be like to be a giant participant in synthetic intelligence (AI), the thrill across the inventory has cooled off considerably over the previous a number of months.
This yr, the social media stock is in destructive territory, and it’s down round 24% from its 52-week excessive of $796.25. What’s improper with the inventory, and is it prone to fall even decrease, or may this be a good time so as to add it to your portfolio?
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While AI generally is a large development alternative for tech firms, buyers have little doubt turn into involved with simply how a lot these companies are investing in AI. Earlier this yr, Meta introduced it might be spending between $115 billion and $135 billion on capital expenditures for 2026, because it appears to be like to develop “superintelligence.” By comparability, final yr, the corporate’s complete capital spend was $72 billion.
The drawback is that buyers could also be involved about whether or not such important investments will repay. Meta has, in spite of everything, poured billions of {dollars} into the metaverse, which continues to be a drain on the enterprise. Last yr, its Reality Labs division incurred losses totaling greater than $19 billion. The firm has just lately been backing away from its metaverse efforts because it pivots extra towards AI, however it’s a reminder that the enterprise hasn’t all the time been that cautious with its spending prior to now, and AI could possibly be a continuation of that.
Meta’s enterprise is essentially robust, as the corporate generated 22% income development final yr, and its revenue margin was spectacular at 30%. Remember, that is whilst the corporate burned by money on the metaverse. The sheer monetary energy it possesses allows it to tackle a lot of these dangers and nonetheless produce robust outcomes. The inventory can also be not that expensive, because it trades at 25 occasions its trailing earnings, which is roughly in keeping with the S&P 500 common a number of of 24.
However, the inventory is down about 9% this yr, and it’ll have a tricky time turning issues round, given the bearish sentiment on tech of late and issues round excessive AI spending. Unless Meta can present that its aggressive AI push is paying off, the inventory could proceed to fall decrease within the weeks and months to come back. And with it having a nasty status for spending too closely prior to now, I’d take a wait-and-see method with the inventory proper now.
