Spending On New Meta AI Causes Sharp Share Price Drop

Meta, the parent company of social media giants Facebook, WhatsApp, and Instagram, faced a significant drop in its share prices following the announcement of increased spending on artificial intelligence (AI). Despite reporting strong earnings figures, Meta’s shares plummeted by more than 15% in after-hours trading in New York.

CEO Mark Zuckerberg attributed the decline to the time it will take for the substantial investment in AI to translate into increased revenues. Additionally, Meta revealed that its competitor, Threads, has surpassed 150 million monthly active users, intensifying competition in the social media landscape.

Analysts from Forrester noted that Threads could potentially outperform Meta’s X platform, positioning itself as a sought-after alternative to Twitter for both users and advertisers. Moreover, Meta could benefit from potential developments surrounding the sale or ban of TikTok in the US.

Meta has been integrating AI tools into its ad-buying products and social media platforms to drive earnings growth. These AI features include chat assistants and other enhancements aimed at improving user experience and engagement.

Despite the positive earnings report, Meta announced an increase in its spending forecast for 2024, expecting to invest between $35 billion and $40 billion in AI and other initiatives. This revision outweighed the earnings news for investors.

Analysts acknowledge the rationale behind Meta’s AI-focused strategy, especially in a climate of digital advertising uncertainty, driven by factors such as upcoming elections in more than 50 countries. However, regulatory challenges remain a significant concern for Meta, following past fines and criticism for mishandling data and addressing issues related to child safety on its platforms.

Also Read  Ghana Cocoa Board CEO Highlights Cocoa Sector as Vital to Economy

While Meta has ample resources to navigate legal challenges, market sentiment remains susceptible to fluctuations, reflecting ongoing uncertainties surrounding regulatory scrutiny and other external factors.

Leave a Comment