Why Is Wall Street So Bearish on Meta? There's 1 Key Reason.

Meta Platforms (META 0.97%) had a strong third quarter, but you wouldn’t know it from the company’s share price. Quarterly revenue increased by 26% to $51 billion, and the social media giant also reported more ad impressions and a higher average price per ad.

Despite that, Meta stock is down 16% since that earnings release (as of Nov. 10). While the company’s earnings look good, its spending is sounding alarm bells for shareholders.

Investors are worried about Meta’s AI spending

Meta has gone on a well-publicized artificial intelligence (AI) spending spree this year. CEO Mark Zuckerberg reportedly offered top AI talent pay packages of up to $300 million for the first four years, and Meta is spending heavily on AI infrastructure. The company’s projected 2025 capital expenditures are $70 billion to $72 billion, up from $39 billion in 2024.

Meta has also said that capital expenditures will be “noticeably larger” in 2026 than in 2025. And it has announced plans to invest $600 billion in the U.S. by 2028 for AI technology, infrastructure, and workforce expansion.

The concern is that Meta’s massive AI spending won’t deliver enough revenue growth to be worthwhile. It echoes the company’s failed bet on the metaverse in 2021 and 2022.

Although there are valid worries about Meta, this is still a company with a thriving ads business and a robust balance sheet. The fact that Wall Street is bearish on it right now makes for a good buying opportunity. After all, it did bounce back from its metaverse mishap, and those who invested back then have done very well.