2 hrs ago
Meta Shares Rally on Muse Amid Massive AI Spending Concerns
Meta makes Facebook and is spending a huge amount of money on artificial intelligence.
Its new Muse assistant became very popular in app stores.
That popularity made investors more confident that Meta’s AI plans could eventually make money.
Meta’s stock rose 36% in September through Thursday.
The company also reduced one legal worry by agreeing to pay as much as $18 billion to settle a lawsuit.
However, Meta’s AI spending is expected to reach nearly $140 billion this year and increase later.
That spending could cause Meta to have negative free cash flow in future years.
Some investors think the stock can keep rising, while others warn that its quick climb could reverse.
Meta shares rose 36% in September through Thursday after the launch of its Muse AI assistant.
Muse quickly reached the top of app charts, easing investor concerns about Meta’s costly AI strategy.
Meta agreed to pay as much as $18 billion to settle a social-media lawsuit, removing a major stock-market overhang.
The company is expected to spend nearly $140 billion on capital expenditures this year, with spending projected to rise further.
Analysts remain broadly positive, but some investors warn that the rapid rally leaves Meta shares vulnerable to a pullback.
- Who
- Meta Platforms Inc., its investors, analysts, and shareholders.
- What
- Meta’s shares rallied sharply after the release of Muse and renewed enthusiasm for the company’s AI strategy.
- Where
- On the stock market; the article also references Meta’s products and partnerships in the broader technology and online-commerce markets.
- When
- Shares rose 36% in September through Thursday’s close; they fell more than 3% in early Friday trading.
- Why
- Investors responded to Muse’s early popularity, new AI products, reduced legal uncertainty, and expectations of future revenue growth, despite concerns about enormous spending.
Bullish investors
Cautious investors
AI strategy
Bullish investors
Muse’s rapid popularity and Meta’s new AI products suggest the company’s investment could produce future revenue and strengthen its position in online services.
Cautious investors
Meta still must prove that its AI efforts can generate enough money to justify the vast expense.
Stock outlook
Bullish investors
Supporters argue that Meta has above-market growth, massive scale, and broad distribution while trading at a valuation close to or below major market benchmarks.
Cautious investors
The shares are near the average analyst price target, and the speed of the rally makes them vulnerable to a pullback.
Spending and financial pressure
Bullish investors
Investors may accept heavy spending because analysts expect strong sales and net-income growth in 2026.
Cautious investors
Capital spending is projected to keep increasing, while free cash flow is expected to turn negative and growth is expected to slow afterward.
Key facts
- September stock gain
- Meta shares rose 36% through Thursday’s close.
- Muse performance
- The Muse personal AI assistant quickly rose to the top of app charts.
- Legal settlement
- Meta agreed late last month to pay as much as $18 billion to settle a social-media lawsuit.
- 2026 capital spending
- Meta’s capital spending is expected to reach nearly $140 billion this year.
- Projected 2027 spending
- Capital spending is expected to rise to $197 billion next year.
- Free cash flow outlook
- Meta is expected to have negative free cash flow of $6.4 billion in 2026 and $29.2 billion the following year.
- Analyst sentiment
- More than 90% of Bloomberg-tracked analysts rate Meta shares a buy.
Quotes
Rob Biederman
Co-founder and managing partner at Asymmetric Capital Partners
“Right now Meta offers a below-market multiple for above-market growth, which is attractive on its own, but it also has massive scale and distribution, which are advantages that will be really hard for competitors to overwhelm”
livemint.com
“Muse clearly validates its AI strategy and position, after a year and a half where the stock was basically flat because people didn’t know if AI was going to be a net positive or a net negative.”
livemint.com
Sources
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