Apr 25, 2024 - Business

Mark Zuckerberg defends Facebook's AI strategy as stock plunges: "We're investing"

Illustration of a frowning face made from the Meta logo

Illustration: Annelise Capossela/Axios

Meta's AI spending spree is starting to give investors an ulcer.

Zoom in: The Facebook and Instagram owner's stock plunged more than 10% today after the company warned Wall Street that it could take years for its big bets to pay off.

Between the lines: Wednesday's revenue forecast signaled a slowdown for the company, which has otherwise been outperforming against investor expectations over the past year.

  • "Some undoubtedly wonder if the company's positive momentum is somewhat or even largely a thing of the past," wrote Scott Kessler, global sector lead for technology media and telecommunications at market research firm Third Bridge.

The big picture: From the beginning of Meta's earning's call after the bell Wednesday, CEO Mark Zuckerberg sounded defensive about his strategy of blasting away at various high-cost futuristic projects, including AI and mixed reality.

  • He acknowledged a "multiyear investment cycle before we fully scale" AI products.
  • But "we've historically seen a lot of volatility in our stock during this phase of our product playbook, where we're investing in scaling a new product but aren't yet monetizing it," he said.

Yes, but: Meta is one of the few social media companies that's been able to recover all of its losses from the pandemic-driven ad slowdown in 2022.

  • The company has been able to protect its business from the long-term impact of Apple's privacy changes by investing in short-form video and AI ad products.
  • The stock is still up 26% on the year. And several analysts, including from JPMorgan and Barclays, lowered their price targets for Meta Thursday, but voiced support for its long-term strategy.

What to watch: How the possibility of a TikTok ban affects interest in Facebook and Instagram.

  • "We've obviously been following the events related to TikTok closely, but at this stage, it is just too early, I think, to assess its impact or what it would mean for our business," Facebook CFO Susan Li told investors.
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