Meta Shares Plunge as AI Infrastructure Spending Outlook Alarms Investors

Meta Platforms (META) shares closed Thursday at $611.91, marking an 8.55% decline. The sell-off occurred despite the company reporting first-quarter revenue and earnings per share (EPS) that exceeded analyst expectations, highlighting a disconnect between current profitability and future spending plans. The market's negative reaction stems primarily from Meta's updated capital expenditure guidance. The company indicated that spending on AI infrastructure and data centers could potentially reach $145 billion in 2026, shifting investor focus from the strength of the core advertising business to the immense costs of expanding capacity for future AI products. Trading activity was intense, with volume reaching 52.6 million shares, approximately 218% above the three-month average of 16.2 million. This volatility occurred against a broader market rally; the S&P 500 added 1.08% to finish at 7,209.1, while the Nasdaq Composite gained 0.89% to close at 24,892. While industry peers experienced a different trajectory—Alphabet closed up 9.97% and Snap rose 1.51%—Meta's outlook raised specific questions about the efficiency of its AI investments. Investors are now weighing whether improvements in ad auctions, recommendation systems, and Reels monetization can offset the heavy costs of chips and servers quickly enough to protect margins and free cash flow.