Meta’s AI spending spree has even the most bullish stock analysts wondering: How much capex is too much?

Core Viewpoint - Meta Platforms is facing profitability challenges due to aggressive spending on artificial intelligence (AI) infrastructure, as highlighted in a recent investor note from MoffettNathanson [3][6]. Financial Performance - Meta's stock price has decreased nearly 20% over the past month, influenced by its latest earnings results released on October 29 [3]. - MoffettNathanson has revised its price target for Meta's stock from $875 to $750, while still maintaining a "buy" rating [8]. Investment Strategy - Meta is heavily investing in AI infrastructure to compete with other major tech companies like Amazon, Microsoft, and Alphabet, which are also investing significantly in AI [3][9]. - The firm notes that Meta's capital expenditures (capex) are projected to reach 47% of revenue next year, significantly higher than Microsoft (29%), Alphabet (26%), and Amazon (16%) [10]. Market Position - Analysts express concerns that Meta is attempting to compete at a level beyond its current capabilities, particularly as it lacks a cloud platform that its peers possess [9][10]. - There are worries about a potential AI bubble, reminiscent of the dotcom era, raising questions about the long-term viability of these investments [5].