Big models and AI glasses, Zuckerberg wants them all! Wall Street, however, questions: Meta's (META.US) passionate spending is reminiscent of the metaverse craze back in the day.

As of the closing of the US stock market on Thursday, the stock price of Meta Platforms (META.US), the parent company of Facebook and Instagram, fell sharply by 11.3%, continuing the significant decline after-hours on Wednesday, with a current market value of approximately $1.68 trillion. Previously, this social media and AI tech giant incurred a one-time expense of nearly $16 billion after implementing the OBBBA tax law signed by former US President Donald Trump (i.e. the "Big and Beautiful" law), significantly impacting its net profit for the third quarter, which plummeted by 83% to $2.71 billion from $15.69 billion in the same period last year. Despite the continued expansion of its digital advertising revenue with the help of the AI wave, the CEO and founder of Meta, Mark Zuckerberg's fervent investment in AI has made Wall Street uneasy. While Meta's "AI ambitions" do excite investors aiming to integrate AI software and hardware ecosystem in the future, thereby becoming the strongest leader in the field of AI big models, AI applications mainly based on intelligent bodies, and AI smart glasses analysts on Wall Street seem increasingly concerned about the growing capital expenditures of this tech giant. Some senior analysts have begun to downgrade their price targets for Meta in the next 12 months, though the targets are significantly higher than the current price, the expectations for potential growth have been notably reduced. In terms of Meta's profit, a relatively positive news is that, after experiencing a one-time non-cash tax expense of $15.93 billion, in the remaining time of 2025 and in the coming years, this tech giant is expected to significantly reduce its tax burden due to the new Trump OBBBA tax law. The Meta management also warned that as it continues to "massively invest funds" in 2026 to achieve its goal of mastering key AI technologies and supporting a massive AI training/inference infrastructure, its overall expenditure will accelerate at a "significantly faster percentage increase" in 2026. According to Meta management in an earnings conference call, the capital expenditure increase in 2026 will be "significantly higher" than in 2025, with the latest guidance for the company's full-year capital spending at around $70-72 billion (a significant increase from the previously provided $66-72 billion). These increasingly large capital expenditures are primarily focused on AI computing infrastructure (such as NVIDIA Corporation AI GPU computing clusters, data center critical hardware expenditure, and Meta's self-developed AI ASIC computing components, etc.). Regarding the total expenditure expectation for 2025, Meta management further raised the lower limit of its full-year total expenditure expectation by $2 billion and the original total expenditure scale was already very high. After this adjustment, Meta expects its full-year expenditure to be between $116-118 billion, compared to the previous range of $114-118 billion. AI big models and AI smart glasses, both are desired by Zuckerberg Meta is planning the construction of a large-scale new AI data center campus and a new generation of large server rooms based on "AI optimization" (such as liquid cooling technology, ultra-high power racks, and a brand-new high-performance network infrastructure and storage architecture) for training/inference workloads for Llama series AI big models, as well as large AI workloads for advertising/content products. The "Superintelligence Labs" established by Zuckerberg at Meta are dedicated to creating the world's most powerful series of AI big models and an AI application software ecosystem based on the cutting-edge large models under the increasingly large AI infrastructure construction in recent years the Meta AI artificial intelligence ecosystem. According to a recent report by industry analysts at Bloomberg Intelligence, the total revenue of the generative AI market is expected to grow from about $40 billion in 2022 to $13 trillion in 2032, a 32-fold increase over the course of 10 years, with a rapid compound annual growth rate of up to 43%. The Bloomberg Research team pointed out that market expansion initially concentrates on the strong demand for the infrastructure required for training AI systems, followed by the subsequent terminal devices using AI models, and the strong demand for various services types such as advertising placement, software applications, and other services. In the application ecosystem oriented towards B2C users such as advertising placement and software applications, Meta is undoubtedly most proficient in this field. AI smart glasses are another concentrated area of Meta's large expenditure. Meta's CEO and founder, Mark Zuckerberg, is doubling down on the future of "edge-side AI" beyond smart phones, planning to integrate advanced AI big models with intelligent wearable devices perfectly, and striving to challenge Apple Inc.'s dominant position in a wide range of consumer electronics fields including the iPhone and wearable devices in the "post-smart" era. The description of the "post-smart era" mainly emphasizes the trend perception, describing a time when the penetration rate of AI big models carried by new wearable consumer electronic devices like AI smart glasses increases rapidly, as the demand for smart phones continues to slow down steadily. In the eyes of Zuckerberg, the AI smart glasses with high-definition micro-screens will be another milestone for Meta to move towards true "augmented reality (AR) + AI" smart glasses. In an August market manifesto, Zuckerberg outlined his concept of "Personal Superintelligence." This concept includes an AI smart glasses that can "see, hear, and interact deeply with users around the clock," possibly replacing smart phones as the primary gateway to the AI-based digital world. "If personal superintelligence can deeply understand our daily lives, grasp our goals, and help us achieve those goals, it will be the most useful tool," Zuckerberg wrote in the manifesto. For a long time, this American tech giant has been trying to replace the iPhone ecosystem with Meta's intelligent consumer electronics products, but has repeatedly failed. Now, he believes that Apple Inc. is significantly "lagging behind" in the field of edge-side AI, and as a result, has increased investment by offering huge salaries to attract the top AI talent globally. Meta's AI smart glasses currently need to be used in conjunction with mainstream smart phones on the market including Apple Inc.'s iPhone, but the future lineup of Meta's AI smart glasses is expected to have built-in displays and complete AI super assistants, showcasing various breakthrough AI features based on Meta's exclusive AI big model ecosystem. Doubts from Wall Street Following the third-quarter report, Oppenheimer downgraded Meta's investment rating from "outperform the market" to "match the market," took off its target price expectations, stating that the risk/reward has been "appropriately reflected and priced in" after the stock price plunged in a single day. This Wall Street investment firm expressed that the significant investments in Meta's AI superintelligence division have unclear profit opportunities and actual prospects, similar to the massive spending on the metaverse in 2021/2022, evoking some unpleasant memories. Another institution, Bernstein, praised Meta's advertising revenue growth driven by AI execution, but indicated that after the company significantly raised its investment warning levels, it reminded one of "those days spent in the metaverse." The institution stated that the strong growth of digital advertising in the third quarter was the main driver of business revenue growth, with a very strong growth trend in pricing; revenue growth in the paid message business area remained strong but on a smaller scale. Bernstein's rating for Meta remains "buy," but the target price was cut by $30 to $870, implying a potential upside of about 15.7%. Citigroup maintained a "buy" rating but significantly lowered its target price for Meta from $915 to $850 (implying a potential upside of about 13.1%). The institution now expects further weakening of profitability in 2026 due to Meta's increasingly aggressive spending and investments next year. The Citigroup analyst team admitted that they had underestimated the scale of Meta's AI investments, and the scale had indeed exceeded the expectations of most investors. Truist Securities still holds a constructive and positive attitude towards Meta, believing that as long as the company continues to achieve a stronger revenue growth and free cash flow expansion in the short term, it is "eligible" to continue with large-scale investments. The institution also pointed out that the third-quarter performance reflects a strong increase in Meta's digital advertising business share, benefiting from significant improvements in Meta AI's advertising recommendations, AI monetization paths, and user growth/engagement. Their rating remains "buy," but the target price was revised down by $15 to $875, indicating a potential upside of about 16.4%. Piper Sandler described Meta's performance as "impressive," and stated that the comments about expenses in 2026 creating pressure on the stock price present a buying opportunity. The institution expects Meta's operating profit to remain roughly the same next year, with a potential decline in free cash flow. They still bullish the large investments in GEM, Lattice, and Andromeda related to advertising models. Their rating remains "neutral," but the target price was adjusted downward by $40 to $840, implying a potential upside of 11.8%. The analyst team at Bank of America Corp expressed that given the limited growth prospects in 2026 earnings per share and the pressure on free cash flow compared to the previous year, they expect significant controversy in the stock price outlook of Meta. However, they believe that the company is in a strong position with a massive user network and significant opportunities in the next two years to integrate a remarkable series of AI applications, including content creation tools. The institution stated: "We believe most of the negative news regarding expenses is currently reflected in the stock price curve, and catalysts such as the development of new AI big models and AI content creation tools can drive higher user and advertiser engagement and revenue in 2026." Bank of America Corp's rating remains "buy," but the target price was lowered by $90 to $810, implying an upside of 7.8%. Seeking Alpha analyst Ahan Vashi raised the rating for Meta to "buy," stating that the company's third-quarter revenue and core KPIs performed strongly, but the significant one-time tax expense of around $16 billion led to a sharp drop in earnings per share and triggered a stock price decline. Vashi noted that despite the significant increase in expenses and capital spending, it is undeniable that Meta's valuation is currently attractive for investors, with a five-year compound annual investment return expectation of around 16%, supported by both technical and fundamental analysis of Meta's prospects, with a target range of $850-1075 per share. Seeking Alpha analyst Kenio Fontes upgraded the company's rating to "buy" after the third-quarter report, attributing the stock price decline to an "overreaction" in response to the one-time impact of non-recurring tax fees. Fontes pointed out that Meta's core business remains strong, with total revenue growing by 26% year-on-year, the advertising business being solid, and AI and Reality Labs related revenue streams continuing to expand. He also emphasized that the company's current price-to-earnings ratio based on 2026 estimates is around 23x, making it the cheapest among the "Big Seven Tech Giants" in the US stock market, thereby enhancing the safety margin. Fontes stated that Meta's solid fundamentals and discount valuation provide an attractive opportunity for the medium to long term.