Meta Platforms was the rare tech giant last week that detailed big AI spending plans without its stock taking a hit. But after jumping last week following a strong second quarter report, Meta stock is feeling the squeeze of a broader sell-off.
Meta stock fell 2.5% on the stock market today to close at at 475.73. Shares opened lower by as much as 7% before paring losses.
Still, after losing 2% on Friday, Meta stock is sitting below both the 21-day and 50-day moving averages. Shares had surpassed both those lines as investors reacted positively to Meta's second quarter earnings Thursday. The stock closed at 474.83 prior to releasing earnings results late Wednesday, before jumping to 497.74 in Thursday trading on a strong reaction to the report.
Meta is falling amid a broad market sell-off. A weak U.S. monthly jobs report Friday heightened concerns the U.S. economy is slowing down. Big Tech companies that drove much of the market's rally in the past 12 months have been hit particularly hard. Chipmaker Nvidia lost 6% Monday and shares of Microsoft fell 3%.
Meta Stock: Watching AI Spending
For Big Tech stocks, fears about an AI bubble are growing. Hedge fund Elliott Management wrote to investors last week that AI is "overhyped with many applications not ready for prime time," according to a Financial Times report.
Meta Chief Executive Mark Zuckerberg sees AI as crucial to the company's future and has pledged to keep spending. Last week, the company once again upped expectations for 2024 capital expenditures. The firm also said to expect "significant" increases for capital expenditures in 2025.
Meta stock fell following the company's first quarter report on concerns about its stepped up AI-related capex spending. But the Facebook parent's strong second quarter appeared to allay those concerns.
"Meta reported strong 2Q results, and although it raised the lower end of its full-year capex guidance, we would argue that its investments in AI are already paying off (better engagement, advertiser tools are driving incremental budgets), while both 2Q results and 3Q guidance were ahead of (Wall Street consensus)," Stifel analyst Mark Kelley wrote to clients Sunday.
Other Social Media Stocks Slide
Meanwhile, other social media stocks fell Monday within the broader sell-off. Snapchat parent Snap shed 7% to close at 8.71. Coming off a Q2 report last week that showed slower-than-expected sales growth, Snap stock is trading near lows not seen since fall 2023.
Pinterest lost 1.5% to close at 28.67. Pinterest stock sank 15% last Wednesday, after reporting Q2 results that beat expectations but giving a weaker-than-forecast sales outlook.
Reddit stock fell 1% to close at 56.83. The forum-based social network reports second quarter earnings late Tuesday.
