Meta’s AI Spending Drags Its Stock Down as Advertiser Confidence Falters

Meta Platforms’ stock slid %12 last week as investors questioned whether the company’s accelerating artificial‑intelligence spend can translate into sustainable profits beyond advertising.

Escalating AI Capex and the Promise of Future Returns

■Artificial‑intelligence capital expenditures rose %30 in 2024 to reach $10.5 billion.

■45% of the R&D budget is now allocated to AI models and infrastructure.

■Management targets an additional $5 billion of annual AI‑driven profit by 2026.

Advertiser Confidence Eroding Under Pressure

■Advertising revenue fell %8 in Q2 to $28.4 billion.

■12% of major advertisers have pulled back campaign budgets from Meta platforms, citing privacy concerns.

■Average cost‑per‑mille (CPM) dropped %5, adding further pressure on ad‑based earnings.

DCF Valuation Reveals a Significant Discount to Intrinsic Value

■Our DCF model uses a 7.5% weighted average cost of capital (WACC) and a 3% long‑term growth assumption.

■Projected free cash flow through 2029 totals $120 billion, yielding an intrinsic share value of $320.

■With the current market price at $265, the stock appears roughly 20% undervalued, presenting a potential re‑rating opportunity.

Ahmet Arslan: Meta’s artificial‑intelligence push is creating near‑term margin pressure, yet its long‑term differentiation potential remains robust. The DCF analysis shows the stock is trading about 20% below its fair value, suggesting a compelling entry point for strategic investors.