Meta falls as investors balance Muse growth with rising AI costs

Oct 22 : Shares of Meta Platforms fell about 3 per cent in premarket trading on Thursday, as investors weighed the benefits of the company's fast-growing AI agent business against the mounting costs of funding its ambitious AI expansion.

The stock has gained more than 5 per cent this year and, if current losses hold, is set to erase about $50 billion from the company's market value.

• The downbeat reaction comes despite Meta reporting stronger-than-expected quarterly revenue, forecasting fourth-quarter sales above Wall Street estimates and highlighting rapid adoption of its new AI agent app, Muse

• The earnings report came hours after a New Mexico judge ordered the company to pay a $25 billion penalty in a data-privacy case linked to Cambridge Analytica. Meta said it plans to appeal the ruling

• The Instagram parent is spending heavily to support its AI plans, with an expected annual capital expenditure forecast between $135 billion and $145 billion. It also reported a free cash flow deficit of $2.12 billion in the third quarter, compared with positive free cash flow a year earlier

• Deutsche Bank analyst Benjamin Black said Meta's AI investments were generating stronger advertising performance and engagement, creating a "positive thesis creep" around the stock as investors increasingly view computing infrastructure as a revenue-generating asset rather than a cost burden

• Meta also announced plans to create a new class of non-voting Class C shares, giving the company additional flexibility for acquisitions and employee compensation while preserving CEO Mark Zuckerberg's voting control

• At least 13 brokerages have raised their price targets on the stock after the results, according to data compiled by LSEG