Meta (META) to Spend $135 Billion on AI

Meta Platforms, Inc. (NASDAQ:META) runs the world's largest advertising business built on top of Facebook, Instagram, WhatsApp and Threads, and shares fell 4.9% to 582.90 dollars as investors weigh whether its ballooning artificial intelligence spending will keep paying off. The stock now carries a market capitalization of 1.48 trillion dollars.

Why the Selloff Is Happening Now

The proximate cause is capital allocation. Meta has told investors it plans to spend between 125 billion and 145 billion dollars on capital expenditures in 2026, mostly for AI infrastructure such as data centers and computing clusters. The high end of that range is roughly double the 72 billion dollars the company spent last year. For a business long prized for capital light economics and prodigious free cash flow, that shift toward heavy fixed investment is forcing a reassessment of the stock's valuation multiple, currently 24.31 times trailing earnings against earnings per share of 23.97 dollars.

Advertising Remains the Whole Story

Everything Meta does with AI ultimately points back to advertising. On the first quarter 2025 earnings call, chief executive Mark Zuckerberg outlined five AI priorities, from better content recommendations to business messaging and the Meta AI assistant, but singled out advertising automation as the biggest lever. He described a future where any business simply states its objective and target cost per result, and Meta's systems handle targeting and optimization from there. Ad sales came to 55 billion dollars in the first quarter, or 98% of total revenue, a concentration that makes the ad engine's performance the single most important input into the stock.

Impressions grew 19% year over year in that quarter while average price per ad climbed 12%, combining to push revenue up 33%, the fastest pace since the third quarter of 2021. Zuckerberg has argued that if Meta succeeds in automating ad buying end to end, advertising itself could claim a meaningfully larger share of global GDP than it does now.

Valuation, Momentum and Yield on META

Shares trade well below their 52 week high of 691.52 dollars and are approaching the lower end of the 540.18 to 691.52 dollar range, having fallen 15% in 2026 through late June and roughly 29% from their record. An RSI of 50.04 shows the stock sitting at a neutral momentum reading, neither oversold nor overbought, which suggests the market has not yet reached a decisive verdict on the capex ramp. The 0.36% dividend yield remains a minor consideration for a stock still valued primarily on growth and margin durability rather than income.

The bull case rests on Meta's advertising engine already demonstrating that AI investment translates into pricing power and impression growth, with 33% revenue growth as evidence the flywheel is working before most of the new capex has even been deployed. The bear case is straightforward: at 24.31 times earnings, investors are being asked to underwrite a near doubling of spending on faith that returns will scale accordingly, and any deceleration in ad growth or delay in AI monetization would leave the company overextended on fixed costs with a shrinking cushion of free cash flow.

Can Ad Growth Outrun the Capex Ramp?

The central tension for Meta is timing. Capex guidance implies spending nearly double last year's figure well before AI driven advertising gains are fully proven at that scale. Investors have responded by discounting the shares meaningfully from their highs even as the underlying ad business continues to post its strongest growth in years. Whether that gap closes will depend on whether Meta's automated advertising tools keep lifting impressions and pricing at a pace that justifies the infrastructure bill now coming due.