Meta stock charts recovery path following post-earnings plunge

Meta stock (META) has been climbing steadily since last Monday, breaking a four-day slide sparked by concerns over the tech giant’s massive AI spending.

This rally comes after Meta shed nearly 6% last Monday, wiping billions off its market cap following its third-quarter earnings report.

Last quarter, Meta Platforms posted a 19% revenue increase to $40.59 billion, while diluted earnings per stock rose 37% to $6.03.

Net income came in strong at $15.69 billion, up 35% from last year.

Yet despite strong financials, Meta’s costs surged by 14% to $23.24 billion this quarter, with management warning of “significant capital expenditure growth in 2025.”

The rising expenses stem from Meta's aggressive push into artificial intelligence, a sector CEO Mark Zuckerberg has prioritized.

“There are a lot of new opportunities to use AI advances to accelerate our core business with strong ROI potential over the next few years,” Zuckerberg noted on last week’s earnings call.

“So, I think we should invest more there.”

In an analysis, CFA Johnny Zhang suggested Meta’s climbing expenses may weigh on earnings growth more than cash flow.

Higher capital expenditures and depreciation could “significantly impact earnings growth in FY2025,” Zhang said.

Nonetheless, Meta seems ready to shoulder these costs to stay ahead in the AI race.

AI: The “massive secular trend”

Muddu Sudhakar, CEO of AI company Aisera, called artificial intelligence a “top strategic focus” for major tech companies.

“Think of it like the shift from on-prem to the cloud or desktop to mobile—these are huge secular trends that play out over many years,” Sudhakar explained.

It’s not only AI-focused stocks set to gain from this boom.

Established giants like Nvidia, Microsoft, Alphabet (Google’s parent), IBM, and Amazon are all vying with Meta for a share of the market.

Amid stiff competition, Meta remains one of the biggest spenders in the AI space, dedicating $35 billion to artificial intelligence research and development in 2024 alone.

The company has poured resources into a range of AI-driven projects: from search tools and image generation software to smart glasses, AI-powered characters, its Llama language model, and Meta AI, a consumer-facing product.

Analysts caution that all this spending will come at a price, especially in the short term. But it’s not just Meta feeling the heat.

Profit margins for big tech as a whole could face pressure as these companies channel more into AI development.

“It’s expensive to run AI technology, and obtaining capacity is costly,” said GlobalData analyst Beatriz Valle.

“It will take time to see returns and widespread adoption,” Valle added.