Story
Meta Stock Slides as Analysts Warn of Surging AI Costs, Negative Cash Flow
Summary
Shares of the social media giant fell after a Citi research note projected a significant increase in 2027 capital spending, raising concerns that massive AI investment could push the company into negative free cash flow.
Shares of Meta Platforms (META) fell sharply in morning trading, dropping 4.4% after new analyst commentary amplified investor concerns over the escalating costs of its artificial intelligence infrastructure buildout.
Analyst Warnings Spook Investors
The sell-off was triggered by a Citi research note published the prior evening, which projected Meta's 2027 capital expenditure could reach approximately $205 billion. This represents a roughly 22% upward revision from previous estimates. The note warned that this level of spending could push Meta, along with peers Alphabet and Amazon, into negative free cash flow territory in both 2027 and 2028.
Adding to the bearish sentiment, BMO Capital reiterated its "Market Perform" rating on the stock with a $720 price target. While acknowledging Meta's impressive AI model releases, BMO analysts argued that the company has the "least visible AI return-on-investment story" among its large-cap technology peers, reinforcing worries about its estimated $141 billion in 2026 capital expenditures.
Market Reaction and Sector Headwinds
AdThe combination of analyst warnings sent Meta's shares to an intraday low of $632.01, a significant drop from the previous session's close of $664.54. The decline came amid a broader reassessment of AI-related stocks.
The tech-heavy Nasdaq Composite index fell 1.2%, pressured by a sector-wide sell-off that began a day earlier following reports of a delay to Alphabet's Gemini 3.5 Pro AI model. The S&P 500 declined 0.6%, while the Dow Jones Industrial Average remained near flat, indicating the selling pressure was concentrated in the technology sector.
Focus Shifts to Earnings
This confluence of headwinds lands at a sensitive time for Meta, as investors are increasingly anxious about whether the company's massive AI investments will generate adequate returns. The market is now looking ahead to Meta's second-quarter 2026 earnings report, scheduled for release on July 29, for further clarity on its spending plans and the path to monetizing its AI initiatives.
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