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The same week that Nvidia became the world’s first $5 trillion company, significantly propelled by its AI-related investments and products, Meta’s stock had its worst day in three years because traders fear that Meta has overspent on AI. As CNBC reports, Meta shares dropped more than 11% on Thursday and have thus far dropped another 1.3% so far today, as of writing. At its bottom yesterday, October 30, Meta’s share price reached its lowest point in three years. Meta, like many tech companies, is frantically racing to improve its AI technology and tools. The stock market fears that Meta’s aggressive capital expenditures on AI are perhaps too aggressive and are arguably unlikely to pay off. During an earnings call on Wednesday, Meta CEO Mark Zuckerberg defended the company’s AI spending, which is a huge chunk of overall annual capital expenditures nearing $72 billion. “It’s pretty early, but I think we’re seeing the returns in the core business. That’s giving us a lot of confidence that we should be investing a lot more, and we want to make sure that we’re not underinvesting,” Zuckerberg said during the call. Meta is far from alone in its massive AI spending. CNBC notes that Alphabet, Google’s parent company, increased its projected expenditures to $93 billion, while Microsoft indicated that it also expects to spend more this year than in 2024. Although Meta had a disastrous day yesterday, its stock value is still up over 9.5% so far in 2025. Nonetheless, as MarketWatch wrote yesterday, “There’s an AI bubble.” There are many failed AI startups, and spending is unsustainable. However, MarketWatch argues that the biggest players, including Meta, are “essentially unassailable.” The economics publication claims that these companies are so big, and their core businesses so successful, that even “extended periods of disappointing AI returns” won’t sink the ships. This aligns, at least in part, with what Federal Reserve Chair Jerome Powell said this week. As reported by Fortune, Powell claims that most of the AI-related spending is being done by successful companies with actual earnings, rather than speculative spenders. Powell says the AI bubble, if there is one, is not like the dot-com bubble. But massive companies have failed before, sometimes in catastrophic fashion. Whether investors’ worst fears may be realized, there is clearly a general uneasiness about how at least some companies, including massive ones, are approaching AI.
