The slump in US tech stocks widened on Thursday, as shares of Meta Platforms Inc. sank 20%, after costly bets on the parent’s metaverse Facebook and the impact of rising inflation on ad spending spooked investors.
Meta will lose some $67 billion in market value if the slide continues into the session, adding to the trillions of dollars some of the biggest tech companies have lost this year as interest rates rise and the dollar strengthens. .
The firm has lost more than half a billion dollars in market value this year. Its shares were trading at $104.60 before Wall Street opened and it was poised to start the session at its lowest in more than six years.
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Meta’s results come a day after Alphabet and Microsoft reported disappointing numbers, sending tech stocks down across the board.
Analysts say investors are concerned about the company’s spending on capital-intensive projects at a time when the advertising market, its main source of revenue, is drying up.
Meta expects to spend about $10 billion a year on metaverse hardware and software, and Chief Executive Mark Zuckerberg said Wednesday that he estimates those investments will take about a decade to pay off.
“Meta Horizon Worlds is (for the time being) a relative ghost town compared to other immersive 3D worlds like Roblox and Fortnite.said Mike Proulx, director of research at Forrester.
However, one segment of the broader tech sector will benefit from Meta’s aggressive spending: semiconductor makers.
Analysts expect specialist data center companies such as Broadcom Inc, Advanced Micro Devices and Nvidia Corp to get a boost from Meta’s plans. Its shares rose in premarket trading.
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Meta’s plans call for capital expenditures for new data centers and infrastructure for the metaverse, said Ben Barringer, an analyst at Quilter Cheviot.
For Meta, however, things are looking bleak a year after changing its name to focus on the metaverse, shared virtual reality where people can interact with one another through avatars.
So far this year, Reality Labs, the company’s metaverse unit, has posted $9.44 billion in lost revenue after posting more than $10 billion in losses last year.
Meta forecast the unit’s losses to grow further in 2023 and pledged to “catch up” investments after that.
At least 13 brokerages lowered their price target on the stock and JP Morgan cut it to a Wall Street low of $115.
With information from Reuters
