Meta Stock Slides As JPMorgan Downgrade Highlights Mounting AI Spending Risks

Meta Platforms is facing fresh skepticism on Wall Street after a major downgrade flagged concerns over the company’s ability to generate meaningful returns from its escalating artificial intelligence investments.

JPMorgan cut its rating on the stock to neutral from overweight and lowered its price target to $725 from $825, signaling limited upside ahead. The move came shortly after the company reported stronger-than-expected first-quarter results, even as its shares fell sharply following a significant increase in projected capital expenditures.

Meta said it now expects full-year capital spending between $125 billion and $145 billion, up from prior guidance of $115 billion to $135 billion. The revised outlook unsettled investors, sending the stock down more than 9% on Thursday, as reported by CNBC.

The company’s latest earnings showed revenue growth of 33% year-over-year, supported largely by improvements in its AI-driven advertising systems and increased user engagement. Still, analysts are increasingly focused on whether Meta can translate heavy spending into sustainable revenue streams outside its core ads business. JPMorgan analyst Doug Anmuth noted that while ad performance remains strong, competition across the broader AI ecosystem is intensifying, the CNBC report said.

Meta’s push into AI has been expansive and costly. The company has invested heavily in infrastructure, talent acquisition and new product development as it attempts to reposition itself as a leader in advanced AI technologies. This includes the creation of its Meta Superintelligence Labs unit and a reported $14 billion investment tied to the startup Scale AI, alongside hiring its CEO Alexandr Wang.

The scale of spending has raised concerns among shareholders, particularly as rivals continue to strengthen their positions. Companies like Google and Amazon are seen as having structural advantages, including deeper enterprise integration, access to proprietary silicon, and a broader range of AI models. These factors could make it harder for Meta to compete at the highest level, analysts told Reuters.

At the same time, Meta has been rolling out new AI products aimed at expanding its reach beyond advertising. Its Muse Spark model, introduced earlier this year, is designed to power a range of applications, from content creation to shopping and health-related tools. Early usage data suggests increased engagement with Meta AI features, though the long-term monetization path remains unclear, according to Bloomberg.

Investor concerns around Meta’s AI direction are not new. Previous coverage by IBT has highlighted mounting pressure tied to its spending strategy and stock volatility, including a report on the company’s earlier $135 billion AI investment outlook and market reaction. Another IBT report pointed to broader restructuring efforts, including workforce reductions and internal shifts aimed at prioritizing AI initiatives.

Despite the downgrade, the broader analyst community remains largely bullish. Data from LSEG shows that a majority of analysts covering the stock continue to rate it as a buy or strong buy, reflecting confidence in Meta’s core business and long-term AI ambitions.