Meta shares fell 20% on Thursday after its risky but costly metaverse bets and the impact of rising inflation on ad spending spooked investors. Its shares were trading at $100.55, the lowest since February 2016.
Meta, which has lost more than half a trillion dollars in market value this year, would lose another $78 billion if the losses continued until the end of the session, adding to the trillions of dollars that some technology giants have lost this year as interest rates rise and the dollar strengthens.
Investors are concerned because Meta is investing in capital-intensive projects while the ad market, the company’s main source of revenue, is drying up. Altimeter, a technology-oriented hedge fund with a 0.1% stake in Meta, recently claimed that the company had lost investor confidence when it increased spending and moved to the metaverse, adding that large investments in an unknown future of metaverse were oversized and frightening.
The complaint seems valid, since Reality Labs, Meta’s metaverse unit, has already lost $9.44 billion in revenue this year, lost more than $10 billion last year and expects to lose even more next year.
Nevertheless, Meta intends to spend about $10 billion a year on metaverse hardware and software, with Zuckerberg saying that he expects these investments to bear fruit in about a decade and promising to curb investment after next year.
However, chipmakers such as Broadcom, Advanced Micro Devices and Nvidia Corp, whose shares rose between 1.4% and 4.3%, are likely to benefit from Meta’s aggressive spending on the Metaverses.
The sources for this piece include an article in Reuters.