Meta Stock Sold Off, But Investors May Be Missing the AI Payoff

Ajouté : 2026-06-04

[00:00:00]Don't buy a single share of Meta until you watch this video until the end because it's one of those stocks where you think the story should be obvious.

[00:00:10]The company is printing money from advertising. It's still got Facebook, Instagram, WhatsApp, Messenger, and one of the biggest user bases on the planet.

[00:00:20]And now it's using AI across that entire system to decide what people see, to decide what they click, what they watch, and which ads actually convert. So, why did the stock sell off? Well, I say it's because investors are looking at Meta's massive amounts of AI spending and asking a simple but very difficult question. Is this still a smart investment?

[00:00:46]Or is this just another big tech company that's lighting money on fire because everyone else is chasing AI? And that's exactly what makes this setup so important because it would be one thing if Meta was spending billions on AI with no clear business model behind it. But that's not what's happening here. So, in this video, I'm going to walk you through the three biggest things that investors need to understand. First, how Meta is already using AI to make its ad machine stronger. Second, why the market is so worried about the company's massive spending plans. And third, what all of that could mean for the stock from here. My name is Rick Orford. I'm a Wall Street Journal best-selling author.

[00:01:25]I've been trading since 1999, and no, I'm not a financial advisor. That is a good thing. I break down the numbers so retail investors like us can make smarter, more confident decisions with our money.

[00:01:36]I want to thank The Motley Fool for sponsoring this video. The Motley Fool is a company that provides investing insight and stock recommendations for investors of all skill sets and risk levels. You all know how much I love researching new stocks and trying to find the next best investment. So, I'm proud to to with The Motley Fool to bring you 10 stock picks from their popular product Stock Advisor. Stock Advisor has beaten the market by almost six times. Go to fool.com/rico to get your 10 stock picks right now.

[00:02:11]Meta Platforms is one of the largest tech and digital ad companies in the world. And really, I think that's the first thing I I think investors need to understand before looking at the stock.

[00:02:22]Meta isn't a social media company anymore. It's an advertising machine.

[00:02:28]The company operates Facebook, Instagram, Threads, WhatsApp, Messenger, and it's even got Reality Labs, where it's got smart glasses, VR headsets, and other wearables. But look, the core business here is advertising. That's where most of the money comes from. And the reason that matters is simple.

[00:02:45]Meta's got billions of users across all of its platforms, and every time those users scroll, watch, click, comment, share, or message, Meta gets more data about what people care about.

[00:03:01]Then, the company uses that data and AI to turn the attention into advertising dollars. So, when people talk about Meta's AI spending, I don't think it makes sense to treat it like some vague science project. I mean, this isn't just AI for the sake of AI.

[00:03:17]Meta is putting AI directly into the parts of the business that's already making money. Now, the reason development here is that big tech valuations, they've become more and more stretched. The S&P 500 has been hit hitting fresh all-time highs, and many of the largest tech companies are trading at very premium valuations.

[00:03:37]Investors are expecting they are demanding strong revenue growth, and they're expecting clean execution. And honestly, I say they're leaving very little room for disappointment. But Meta's a little different. The company continues to trade at a lower multiple than many investors, including myself. I mean, I've owned the stock for many years.

[00:03:59]might expect for a business of this quality. And that's where the story starts to get interesting for investors because Meta reported very strong earnings in the first quarter of 2026.

[00:04:10]Revenue came in at more than 56.3 billion, and that was up 33% year-over-year. And the company beat analyst expectations. You'd think that would be enough to make investors happy, right? Mhm. No. The stock sold off after management raised its 2026 CapEx guidance to between 125 and 145 billion dollars.

[00:04:33]And that one thing alone, that one metric, completely changed how the market looked at the entire quarter.

[00:04:44]Because instead of focusing on the revenue growth, the earning strength, and the AI improvements inside of the business, investors started to focus on one concern. How much is Meta going to spend? And maybe more importantly, when does that spending start to pay off? Now, I totally understand this concern. When a company says that it might spend up to 145 billion dollars in a single year, investors should be asking questions.

[00:05:14]They should be asking whether the spending is disciplined. They should be asking whether free cash flow is going to come under pressure because it probably will.

[00:05:22]And of course, they should ask whether the returns on that infrastructure will ever be worth it. But at the same time, I also think the market may be missing a part of the picture. Because Meta's AI investments aren't just sitting there waiting for some future launch.

[00:05:38]They're already being used today across all of the businesses, and they're already showing up in the numbers.

[00:05:44]Meta is using AI on Facebook, Instagram, WhatsApp, Messenger, and its broader family of apps. And on the content side, AI is what helps decide what users see first.

[00:05:57]It helps recommend videos. It helps predict what people like you and me are likely to watch next. And it helps adjust feeds in real time. Think about Reels, right? Reels relies heavily on AI to analyze videos, understand user behavior, and serve up the content that keeps people like you and me engaged.

[00:06:18]It shows them what we want. And that matters because the longer people stay inside Meta's apps, the more opportunities Meta has to show ads. And the better those ads perform, the more valuable the business becomes to advertisers. So, this isn't about engagement for the sake of engagement.

[00:06:38]It's about engagement that can become revenue.

[00:06:43]Then on the advertising side, AI is even more important. Meta uses AI to improve ad targeting, optimize campaigns, and help advertisers get better results. And one example is Advantage Plus, which is Meta Meta's advertising automation suite. It uses AI to help build, target, and optimize ads.

[00:07:02]So, basically, Meta's AI is helping to decide who should see an ad, when they should see it, and which version is most likely to work. And that is a very big deal. Because if Meta can help advertisers get better conversions, then advertisers, well, they've got just one more reason to keep spending money on Meta's platforms. And if advertisers keep spending, Meta's ad business becomes even harder to compete with. And now Meta is also using AI to create ads and content. Let me give you an example.

[00:07:35]Right now, advertisers can use generative AI to produce ad copy and adapt different formats across placements like reels and stories.

[00:07:46]Users can also use AI-powered filters, effects, stickers, and image editing tools. And not only that, Meta's even deployed AI assistance across Facebook, Instagram, WhatsApp, and Messenger.

[00:07:58]So, users today can ask questions, they can generate images, they can get recommendations, and they can even chat directly with Meta's apps. And that's important because Meta isn't just trying to pull users into a single AI product alone. It's putting AI where the users already are.

[00:08:18]And that makes the adoption curve much easier. It also gives Meta a much better chance to turn AI into something that strengthens the existing business rather than something that distracts from it.

[00:08:31]Now, when I look at the numbers, I think there's already evidence that AI is helping. Look at this. Ad impressions across Meta's family of apps rose 19% year-over-year, and that trend has actually been accelerating through the past several quarters.

[00:08:48]At the same time, the average price per ad climbed 12%. That was actually the highest annual growth number in the past five quarters.

[00:08:58]So, when investors look at Meta's CapEx and worry about spending, I get it. But, I also think it's important to look at what the business is doing at the same time. They're not just spending more, they're also improving ad impressions, and they're increasing average ad prices, and it's making the core ad machine more efficient.

[00:09:22]And that's why the situation is more nuanced than just saying, "Yeah, AI spending is bad." I mean, it would make sense if investors were worried about a company that's spending heavily with no visible return, but that's not what's happening.

[00:09:35]Meta is already monetizing AI through advertising. Now, it doesn't mean the business is risk-free. It just means the return profile may be more visible than the market is currently giving it credit for. Now, the risk here with Meta is still very real. Despite strong earnings, the stock sold off because investors were worried about how much Meta is spending on AI. The company's CapEx in 2025, well, it topped 72 billion. And that was up 84% year over year. And then in the first quarter of 2026, well, CapEx was 19.8 billion. And management now expects 2026, well, their spending plans, CapEx, to be between 125 and 145 billion.

[00:10:22]At the high end, that would mean CapEx would more than double from last year.

[00:10:27]That is a huge increase, and you'd honestly expect investors to push back, wouldn't you?

[00:10:33]Because when spending rises that quickly, it's going to pressure free cash flow, most likely. And it's going to weigh on margins, no matter what. And it's going to make the market question whether management is getting too aggressive. And even management themselves raised CapEx guidance because it expects key components to become more expensive. That includes Nvidia's GPUs, networking equipment, and memory chips.

[00:10:58]Demand for those components is still very strong.

[00:11:01]And it's pushing all the prices higher.

[00:11:04]Meta also expects more expenses tied to data center expansion. So, the company isn't just spending more today because it wants to, it's doing it because scaling AI infrastructure requires a massive amount of capacity. That's the trade-off that investors have to think about when buying Meta. On one side, Meta's got one of the best ad businesses in the world. It's got billions of users. It's got enormous competitive advantages around data.

[00:11:32]And it's already using AI to improve engagement and ad performance. But on the other side, the company is spending at a level that makes even the strongest investors nervous. That's the problem with the stock right now. The business looks strong. The spending looks aggressive. And the market isn't sure how much credit to give Meta for the potential payoff. Now, let's turn it over to the stock. Over the past 52 weeks, Meta has traded between $520 and $796.

[00:12:02]And it's actually down about 4%. And right now, it's hovering somewhere in the middle of that range. The weakness has continued over the last month, and the stock dropped around 10%. So, even though the business is performing, I would say spectacularly well, the stock is still under pressure. And that tells me that investors are still more focused on future spending rather than current operating strength. And it's normal. The market usually looks ahead. And that's exactly why the stock isn't reacting to the way or to what Meta has already done. It's reacting to what investors think Meta may have to spend next. Now, if you've been watching Meta, but think, "Look, it is still too expensive right now. Maybe you want to own it 15, 20% lower than where it's trading today."

[00:12:53]Check this video up here.

[00:12:55]Because I talk about how you can sell a cash secured put on a stock you want to own and get paid to wait for it to maybe come down to your price. And if it does, you get to buy it. And then, what you do next? Well, you can either just hold the shares or sell covered calls on it, which is the next step in the wheel strategy, which you can watch up here as well. And actually, this question comes up all the time in my community. When a a like Meta pulls back, people ask, is now a buying opportunity? Is now the time to sell a put? Or is the market warning us about something bigger?

[00:13:36]And that connects directly to how I think about the stock from here. Because when a company is high-quality but the market is nervous, sometimes investors need a plan, not just an opinion. So, let's have a look at how the market is currently valuing Meta.

[00:13:55]Right now, the stock trades at a market cap, well, at almost 1.6 trillion. And that means Meta's trading at above 22 times earnings. So, investors are paying more than $22 for each dollar of earnings the company makes. And it's also got a beta of 1.62. And that suggests the stock moves about 62% more than the S&P 500 does in either direction.

[00:14:21]And this all completely makes sense. I mean, when investors get worried about spending, margins, or returns on AI, the stock is going to react sharply. But when I look at the valuation, I don't think the market is pricing Meta like a company with explosive growth expectations.

[00:14:41]It's being priced like a high-quality tech company, not like a company where investors are assuming everything goes perfectly. And that's important because Meta already monetizes AI at scale through its ad platforms. Its AI recommendation systems help improve user engagement. Its ad tools help improve targeting and conversion. And its broader AI strategy is being layered into products that already have massive distribution.

[00:15:08]But unlike many AI plays today, Meta doesn't need to prove that it can eventually make money from AI. Why? It already is.

[00:15:17]The real question is whether the returns are big enough to justify the size of their spending. And I think that's where investors are split. Some investors look at capex guidance and see risk. Others look at ad growth, the AI integration, and current valuation and see opportunity. Personally, for me, as an investor in Meta, I think the valuation suggests the market is focusing more on the risks tied to Meta's AI capex rather than the potential payoff. It doesn't mean the broader market is wrong, but it does mean that the bar may not be as high as it is for some of the other big tech names. So, is now a good time to buy Meta? Well, consider that a consensus among 55 analysts, they think Meta is a strong buy, and that rating has been unchanged over the last 3 months. And those analysts have given the stock an average score of 4.62 out of 5, but it has declined slightly over the period.

[00:16:17]But, the low and high target prices suggest there's between 10 and 66% potential upside over the next year.

[00:16:26]Now, I don't want to make this sound like the analyst ratings should drive the decisions because it really shouldn't. I think investors are going to need to make the decision based on the business, the valuations, the risks, and what they believe Meta's AI investments can produce over time. And when I look at Meta, I see a company where the market is clearly worried about spending. But, I also see a company that's already using AI to improve the business in ways that can show up in real numbers. Higher ad impressions, higher average ad prices, better targeting, more engagement, and stronger monetization across a massive ad platform. And that's why I think the debate around Meta is pretty straightforward. If you believe Meta's AI integrations can help earnings accelerate faster over time, then the stock at today's prices may look very attractive because investors may be underestimating the return that Meta can generate from these investments. But if you're skeptical about CapEx and you think the spending could weigh on free cash flow and margins for too long, then it may be better to wait for more proof. And that's really the whole decision here. But now I want to turn it over to you. Do you believe Meta is spending aggressively because it sees a major return on this opportunity or do you think the company is overbuilding ahead of demand?

[00:17:46]Because the answer to that question probably determines whether the pullback is a warning sign or an opportunity.

[00:17:54]Well, let me know all of that and more in the comments below. And while you're there, if you found the video helpful, don't forget to like and subscribe because it helps others find the video, it supports the channel, and it makes sure that you don't miss out on my next deep dive. Well, that's it for me today.

[00:18:08]Thank you so much for watching and I'll see you next time.