​Meta’s AI Spending Shocks Wall Street as Big Tech Earnings Loom

Meta’s (META) latest earnings report sent shockwaves through Wall Street on Thursday, with shares falling more than 10% as investors balked at the company’s growing AI investments. The sell-off came even as Meta reported solid revenue and user growth, demonstrating how investor sentiment has shifted from excitement over AI innovation to concern over runaway costs.

The company’s plan to boost AI-related spending through 2026 triggered a swift wave of price target cuts from major banks, including Morgan Stanley, Goldman Sachs, and BofA. While most analysts maintained bullish ratings, the tone was clear: Meta’s aggressive spending spree may be outpacing its near-term earnings potential.

AI Ambitions, Skyrocketing Costs

CEO Mark Zuckerberg defended the company’s decision to continue pouring billions into computing infrastructure, saying demand for AI capacity keeps exceeding expectations. “We build to what we think is an aggressive assumption, and then demand keeps growing,” he said, adding that if Meta overshoots capacity needs, it would simply mean “we prebuilt what we’ll need later.”

That rationale did little to reassure investors. Wall Street’s concern isn’t just about overbuilding; it’s about profitability. Meta’s capital expenditures are now projected to reach up to $72 billion this year and climb even more in 2026. The spending spree, combined with another $4 billion quarterly loss in the company’s Reality Labs division, fueled fears that Meta could be burning cash faster than its advertising growth can replenish it.

Despite those challenges, Meta had some bright spots. Its AI-driven advertising tools have reached a $60 billion annual run rate, suggesting that its infrastructure investments are beginning to bear fruit. Still, the immediate question for investors is whether that growth can offset the near-term drag from spending and the ongoing metaverse losses that continue to weigh on margins.

Analysts Split on Meta’s Trajectory

The analyst community’s reaction was mixed. BofA, TD Cowen, and KeyBanc all trimmed their price targets, citing concerns over capital intensity and visibility into future returns. Yet many maintained Buy or Overweight ratings, signaling confidence in Meta’s long-term position as a core AI infrastructure play. Others had a more optimistic view. Analysts at HSBC and Wedbush kept their targets steady, pointing to Meta’s leadership in AI advertising and its strong balance sheet as reasons the company can weather temporary margin pressure.

Meta’s stock, now up about 15% year-to-date, has lagged behind the S&P 500’s 16% rise in the same period; a notable reversal from earlier in the year when it was among the market’s top performers. The sharp correction highlights how investors are reassessing the risk-reward balance of mega-cap tech after an explosive multiyear rally.

Big Tech Faces Its Own AI Reckoning

Meta’s tumble adds tension to the next wave of Big Tech earnings. Apple and Amazon are set to report after the bell, while Microsoft and Alphabet’s results earlier in the week painted a more nuanced picture of the AI boom. Alphabet impressed with record-breaking cloud and ad revenue, while Microsoft’s higher AI infrastructure costs dampened enthusiasm despite strong fundamentals.

Across the sector, investors are dealing with the question: how much AI spending is too much? For now, Wall Street appears willing to reward those with visible monetization paths—like Alphabet and Nvidia—while punishing companies that promise future returns without clear timelines.

Looking Ahead

Meta’s results could be a turning point for the market’s AI narrative. The era of limitless enthusiasm is giving way to one of selective optimism, where execution, not ambition, will separate winners from laggards. With Apple and Amazon’s reports up next, investors are looking for reassurance that Big Tech’s profit engines can keep humming even as AI-related costs surge. Meta’s stumble is a warning shot: in the next phase of the AI race, discipline could matter as much as innovation.