Some investors would prefer that Mark Zuckerberg be more frugal.
Although Mark Zuckerberg made significant investments in artificial intelligence in 2025, he may decide to tighten the belt at Meta Platforms as a New Year’s goal.
Due to the mounting expenses of large data centers and elite AI researchers, Meta (META) had to find innovative ways to raise money. In October, it secured $27 billion for its Hyperion supercomputer in Wall Street’s largest-ever private credit deal. After Zuckerberg revealed plans to increase AI expenditure even more during the company’s third-quarter results call, investor sentiment hit a tipping point. Meta’s stock has dropped 15.8% through Tuesday from its record close of $790.00 on August 12.
Zuckerberg is under pressure to show that the business can control expenses and provide a return on his spending binge. Meta’s core advertising business has grown thanks to AI technology, but in the third quarter, expenses exceeded revenues. Some analysts are worried that this trend may continue when data center depreciation costs begin to appear on the income statement.
Another issue raised by BNP analyst Stefan Slowinski is that, in contrast to its Big Tech contemporaries, like Alphabet (GOOG) and Amazon.com (AMZN), which have cloud computing businesses, Meta’s business model is heavily reliant on advertising revenue. Slowinski told MarketWatch last month that when Amazon and Google construct a data center, they are able to rent out the excess capacity to outside clients, something Meta is unable to do.
More specific guidance regarding Meta’s operating expenses could help shift the narrative, according to a December report from Brian Nowak of Morgan Stanley. The January earnings report, he said, might be a “clearing event.”
Investors are feeling more optimistic about Meta as a result of recent rumors of significant budget cuts in the department that focuses on virtual worlds, the metaverse. Meta’s Reality Labs subsidiary, which houses the metaverse, lost $4.4 billion in the most recent quarter.
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Zuckerberg announced a “year of efficiency” and lowered expenditure on the metaverse, which prompted Meta to undertake a significant cost-cutting effort in 2023. Meta might have more funds to devote to initiatives with a better return on investment, like its advertising algorithm and its Ray-Ban AI glasses, if it were to make additional cuts the next year.
A representative for the company told MarketWatch, “Given the momentum in the metaverse space, we are moving some of our investment from metaverse to AI glasses and wearables within our overall Reality Labs portfolio.” “We aren’t planning any broader changes than that.”
Investors will want to see Meta investigate novel approaches to monetizing AI through wearables, Messenger Bots, and the company’s Meta AI assistant. With more than one billion monthly active users, Meta AI has a strong distribution across several social media platforms, according to the company’s most recent earnings call report. But according to Slowinski, the data on monthly active users doesn’t demonstrate how sticky engagement is or whether it’s on par with ChatGPT or Gemini.
Alexandr Wang’s recently established AI division, Meta Superintelligence Labs, is likewise under pressure to perform after Meta’s most recent Llama 4 model disappointed users earlier this year. According to the Wall Street Journal, the business is working on a text model code-named Avocado and a picture and video model code-named Mango that will be released in the spring.
Additionally, according to a report by Bloomberg, Meta may be moving toward a closed-source approach, which would mean that the technology will no longer be freely available to the general public.
Distributing its models via cloud providers like Amazon and Microsoft (MSFT) would be another way for Meta to make money, Nowak said. In this case, rather of hosting Meta’s AI in-house, clients would pay to rent access to it via a cloud platform.
Nowak thinks the Superintelligence unit might be the most underappreciated aspect of Meta at the moment, as it has the ability to push the stock up to $1,000, or 50% higher than Tuesday’s closing price of $664.94.
