Explained: Why Meta shares crashed 7% in extended trading amid AI spending spree

Shares of Meta Platforms Inc. came under pressure on Wednesday, plunging as much as 7% in extended trade, as investors reacted to concerns around the scale of spending by major US tech firms on artificial intelligence.

The company said it plans to increase investments in AI beyond earlier expectations. Meta, which owns Facebook and Instagram, indicated it would commit billions more to AI projects. The decline followed the company’s announcement that capital expenditure could rise to as much as $145bn, up from a previously guided maximum of $135bn. This metric reflects spending on projects that have yet to translate into business growth.

Chief Financial Officer Susan Li said the company had underestimated its computing needs in prior years and now needs to step up spending to meet demand.


When asked about the returns from such investments, CEO Mark Zuckerberg acknowledged there is no precise roadmap for how each AI-driven product will scale. He said the company has a broad sense of direction and remains confident that its Superintelligence Lab will emerge as a leading global research hub.

Zuckerberg also pointed to the growing impact of AI on the company’s workforce, suggesting it could significantly reshape hiring needs. He noted that small teams can now build in a week what earlier required months of work by much larger groups. On potential layoffs, Li said the company does not yet know what its optimal workforce size will be.

Meta is also dealing with rising regulatory and legal challenges. These include increasing restrictions on teenage use of social media in several countries and a wave of lawsuits from individuals, municipalities, states and school districts alleging that its platforms are designed in a way that harms children.

Several major legal cases are scheduled in the coming months, including the second phase of a key trial in New Mexico and a case in California that could influence nearly 2,000 similar lawsuits filed by US school districts.

On the user front, Meta reported its first quarterly decline in Daily Active People since it began tracking the metric. The company attributed this to internet disruptions in Iran and restrictions on access to WhatsApp in Russia. Despite this, daily active users rose 4% year-on-year in the first quarter to 3.56 billion.

The results come weeks after Reuters reported that Meta is planning large-scale layoffs as Zuckerberg pushes to integrate AI more deeply across the company and restructure its workforce accordingly.

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