The slump in US tech stocks widened on Thursday, as shares of Meta Platforms closed down 24.56%, after costly bets on Facebook’s parent metaverse and the impact of rising inflation on ad spending scared off investors.
The parent company of Facebook and Instagram lost nearly $89.204 million in market value, adding to the trillions that some of the biggest tech companies have lost this year as interest rates rise and the dollar strengthens.
In its quarterly report, Meta reported lower-than-expected revenues and profits. Earnings per share for the period were $1.64, when $1.89 was expected. In addition, the company announced that it plans to proceed with the creation of the metaverse despite rising project costs and declining revenues, causing investors to take the company’s prospects with a grain of salt.
“Mark Zuckerberg seems reckless here. Meta shares plunged after revenues collapsed and they decided to nearly double their CAPEX. It seems that the departure of Sheryl Sandberg (former COO) was timely as this ship is clearly sinking. Investment in artificial intelligence (AI) was boosted and now everyone expects Meta to have a free cash flow problem,” said Edward Moya, Senior Analyst at OANDA.
The Dow Jones Industrial Average rose 0.61% to 32,033.28 points, while the S&P 500 ended down 0.55% to 3,809.50 points. The Nasdaq Composite posted its second day of declines to 10,792.67, down 1.63%.
“Stocks would likely hold up much better if management prioritized earnings over investments in AI and the metaverse. But that’s not the way CEO Mark Zuckerberg runs the company, and a long-term investor shouldn’t want it any other way,” John Ballard, board member of The Motley Fool, wrote to the Nasdaq blog. .
Ballard said that instead of backtracking, the company said it would spend up to $33 billion on capital expenditures next year, which is about the same as previous guidance. Wall Street didn’t want to hear that, especially after earnings per share fell 49% year over year in the quarter.
As of October 26, Mark Zuckerberg’s net worth is $48.9 billion, down $2.7 billion from October 25 and ranking 23rd, according to data from the Bloomberg Billionaires Index.
