Does Meta’s AI spending work? The stock’s next move depends on the response
Shares of Meta Platform are recovering from damage earlier this year, when investors shied away from the telecommunications company’s big investment in intelligence. Wednesday’s earnings will determine if that continues. The stakes are high: Meta has among the most aggressive AI layouts of all the megacaps. In recent weeks, the parent of Facebook and Instagram has laid out investments that include cloud infrastructure and custom chips and major computing commitments — all part of the company’s plan to spend up to $169 billion this year, most of which will go into artificial intelligence. Investors are increasingly focused on whether all that spending is paying off. Until now, the market did not know how to digest Meta’s ambitious plans. The stock initially jumped after its quarter on Jan. 28, where management’s forecast for 2026 and capital spending will be higher than expected and will account for nearly all of 2026’s productivity and revenue growth. For a while, investors were happy and the stock closed at $738. Then the market turned cold. Shares have fallen nearly 29% in two months, reaching $525 in late March. But shares have risen 28% since then, ending Tuesday at $671. While some of that gain was driven by the recovery in the broader market since the March 30 Iran war footing, investors also seemed optimistic about a series of announced investments aimed at expanding Meta’s computing capacity. The release of a new AI model helped with the feeling. The stock is up about 2% for the year. On Friday, Meta announced a multibillion-dollar partnership with Amazon Web Services to use AWS Graviton processors at scale, making Meta one of the world’s largest customers of Amazon’s internal chips. Processors will support workloads tied to developing its core advertising business. Earlier this month, Meta paid $21 billion for AI cloud infrastructure company CoreWeave, adding to an earlier $14.2 billion deal. In March, the company signed a $27 billion deal with Dutch cloud provider Nebius. The company has also expanded its partnership to buy Broadcom’s next-generation AI chips, while also planning its four customer options. META YTD mountain Meta stock performance in 2026. In a well-written note dated March 29, Morgan Stanley analysts argued that the market was too focused on the costs of AI and not enough on the returns, noting that Meta’s business is still booming even as the shares are cheap. “We believe it’s a relationship [time spent] it is growing rapidly [off of large numbers]which gives META more time and engagement to make money, while we believe that the time spent growing is of high quality and can make money again, given the increase in video-based content,” analysts wrote at the time. Jim Cramer spoke the same way during the April Monthly Meeting, telling members, “I don’t like to bet against Mark. [Zuckerberg] when it comes to money.” He added, “You buy a phone with that incredible talent that Zuckerberg got. We used to think that was negative. It’s no longer the cause of the Muse Spark, their new flagship model designed for personal intelligence.” Going into the category, investors want to see more evidence that the strategy translates into strong growth in its advertising business, better products and higher profits. The majority of Meta’s revenue comes from advertising. Investors, including us at the Club, will want to see more of Meta’s A-powered success information in Meta’s. Advantage+, produced ads is AI, and automation, have so far been game changers in improving ad performance. Last quarter, Instagram Reels viewing time increased by 30% year-on-year in the US, while Facebook video viewing time grew by double digits they liked what they saw at first Meta stock closed after Meta released Muse Spark on April 8, with enthusiasm that it can improve its main ad model and justify all the costs of AI large amounts of data to understand language, recognize patterns, think about using information, and generate multimodal responses that handle text, images, and audio, designed to be used on Facebook, Instagram, WhatsApp, Threads, and business tools It should make Meta’s applications attractive and its ads work better, which should help speed up Metaline the company has been working on integrating The goal is the same If Meta offers an ad that can lead to user action – such as buying a product – advertisers are willing to spend more money: Threads, a text-based app Instagram launched in July 2023, saw a 20% increase in time spent by MetaIsupdate AI chief Alexandr Wang, former CEO of Scale AI is one of the AI researchers brought in by Meta as part of its large talent acquisition Spark last year and gives Meta the opportunity to compete with AI leaders such as OpenAI and Google to develop Muse Spark to release LLM’s thinking skills to improve the interaction and monetization of the platform across various applications and services,” analysts wrote in a research report on April 11. Morgan Stanley said that “Meta’s view of future growth remains from its core investment is high,” “one of the next big openings” in 2027 is likely to be an LLM data analytics. A consumer-facing company with experience deploying LLMs – although not yet confirmed – Muse Spark may improve the performance of Meta ads A real AI monetization opportunity with Muse Spark will enable LLM to be adopted by business customers. Meta’s major investments in areas such as subscriptions, agents, API access, and services OpenAI and Anthropic already have a reasonable market share in this area, but competition has not stopped Meta from pursuing a large opportunity. Meta is trying to help build infrastructure with fewer people. of 6,000 as it reallocates resources to AI in our ongoing effort to run the company more efficiently and allow us to adjust to other investments we’re making,” Meta’s chief executive, Janelle Gale, wrote in a letter announcing the news to employees. While the layoffs are not welcome news, Morgan Stanley called the layoffs a “dangerous development” based on estimates for the company’s 2027 earnings per share (Jim Cramer’s Charitable Trust is long META. See here for a full list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim sends a stock alert before buying a stock on CNBC TV, you wait 72 hours after issuing a trade alert before making a trade. OUR PRIVACY POLICY, AND OUR DISCLAIMER, NO REASON FOR YOUR OBTAINING ANY INFORMATION PROVIDED BY CONTACTING THE INVESTMENT CLUB IS NOT GUARANTEED.
