Meta Stock Drops After Goldman Sachs Warns of AI Costs

Meta Platforms shares fell 3.4% on September 25, erasing earlier gains. The stock had initially risen 4.5% following optimism over the company's Muse AI agent, but reversed course after a cautious analysis from Goldman Sachs regarding artificial intelligence capital expenditures.

Goldman Sachs estimates that AI hyperscalers will spend 800 billion dollars on capital investments this year and 1.1 trillion dollars next year on data centers and chips. The firm asserts that these companies must generate roughly 300 billion dollars in annual revenue from AI services to break even, and nearly 1 trillion dollars annually to reach significant profitability.

The financial institution suggests that the long-term profitability of Meta and its peers depends on whether global software spending converts to AI spending. Furthermore, the firm notes that corporate customers must see a visible impact on their own earnings to justify the costs of these services.