Meta Platforms Inc. (META) shares tumbled more than 7% in pre-market trading after the social media giant sharply increased its capital expenditure forecast, fueling investor concerns over the rising costs of its artificial intelligence ambitions.
"If capex is paired with positive revenue, measurable revenue, and outlooks that show that earnings and revenue are being guided higher, then I think increased capex will be OK for the stocks,” said Anthony Saglimbene, chief market strategist at Ameriprise. “But if we see any slippage on the outlooks, that will lead to more volatility."
The Facebook parent now expects 2026 capital expenditure to be between $125 billion and $145 billion, up from a prior forecast of $115 billion to $135 billion, as it doubles down on its AI infrastructure. The move overshadowed a first-quarter revenue beat, with sales rising 31% to about $56 billion. The stock drop reflects a broader anxiety among investors who are beginning to question the massive outlays on AI across the tech sector and when they will translate into significant profits. A recent report that ChatGPT-owner OpenAI missed internal revenue and user targets has added to these concerns.
The selloff in Meta shares came during a pivotal day for markets, with investors also digesting a hawkish hold on interest rates from the Federal Reserve and a slate of earnings from other tech titans. The Fed kept its benchmark rate in a 3.5%-3.75% range but the decision was the most divided since 1992, with four dissenting members. In his final press conference as chair, Jerome Powell acknowledged that the U.S. economy has been "quite resilient," but warned that rising geopolitical tensions and energy prices could push up inflation. The commentary sent the 10-year Treasury yield to a one-month high of 4.42% and pushed the U.S. Dollar Index higher to 98.86.
Tech Earnings Under Scrutiny
Meta was not the only Magnificent Seven member in the spotlight. Alphabet (GOOGL) saw its shares jump 7.1% in after-hours trading after it beat revenue estimates, driven by strong cloud growth, and raised its own capex outlook. Amazon (AMZN) also rose 2.7% after a solid beat on earnings and revenue, with its AWS cloud unit showing a 28% jump in sales. Microsoft (MSFT) reported strong Azure growth but a softer margin outlook kept its after-hours gains to just 0.3%.
The mixed reactions highlight the double-edged sword of AI spending. While the outlays are fueling a rally in semiconductor and data storage stocks—the Philadelphia semiconductor index has surged 32% in April—shareholders of the big tech spenders are growing more discerning, demanding a clearer path to profitability from their multi-billion dollar AI investments.
This article is for informational purposes only and does not constitute investment advice.
