Meta’s AI splurge rattles investors
Meta's decision to join the AI race is driving investors away


Meta Platforms has suffered its second-worst daily loss in market value on record.
Part of the reason for last month’s 15% slide was that while Meta eclipsed forecasts for first quarter profits and sales, its outlook for the second quarter disappointed, says Jack Denton in Barron’s.
But the main problem was that the owner of Facebook “shocked” investors with plans to “spend even more aggressively on artificial intelligence [AI]”. It raised forecasts for full-year capital expenditures to between $35bn and $40bn, up from between $30bn and $37bn.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The money will go towards “ambitious AI research and product development”. Meta’s decision to bet on AI to this extent has undermined the “hard work the company has done to convince the market it has a tight rein on the purse strings”, says Russ Mould of AJ Bell.
It has also “reawakened” concerns about “a lack of discipline” from CEO and founder Mark Zuckerberg only a few years after he opted to spend large sums on the Metaverse, a punt on virtual reality that will take years to pay off (if it ever does).
What’s more, even if the investment proves the correct decision, the fact that Meta feels the need to engage in “an AI arms race” is worrying.
Are investors pulling away from the AI boom?
Meta’s pivot to AI is clearly “not going well”, says Robert Cyran on Breakingviews.
Still, that doesn’t mean that investors’ appetite for AI in general is waning. They are more upbeat about Microsoft’s capital expenditure, mostly on AI, tripling to more than $40bn this year.
The difference? Unlike Meta, Microsoft is also a “shovel merchant” in this gold rush, thanks to its Azure cloud platform, used by firms like OpenAI to train and run AI systems. Azure’s sales rose by 31% in the first quarter, with the Intelligent Cloud division Microsoft’s “biggest and fastest growing”.
It seems that for now, “investors are more keen to reward the toolmakers than the speculators”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
Who won the £1 million jackpot in the May Premium Bonds prize draw?
NS&I has announced the winners of May’s Premium Bonds prize draw. Who won the £1 million jackpot and how can you find out if you scooped a prize this month?
-
Trump's first 100 days: investment winners and losers
Donald Trump triggered a rollercoaster on the stock markets during the first 100 days of his second presidency. We look at which funds, investment trusts and sectors have performed best and worst
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Watch out for fake Steven Bartlett video – you could lose thousands
Scammers are trying to tap into the Trump tariffs chaos with fake stock tips. Knowing what to look out for could save you thousands of pounds, says Kalpana Fitzpatrick
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
Meta beats earnings expectations by 23%
Meta shares surged after the company beat expectations on revenue and earnings. Microsoft also posted an earnings and revenue beat.
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money