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Meta experiences a $200 billion decrease in value as Zuckerberg shifts focus to AI and the metaverse.

Mark Zuckerberg, the CEO of Meta (formerly Facebook), recently made a significant shift in focus towards artificial intelligence and the metaverse during the company’s earnings call. He emphasized the importance of AI and the opportunities within the metaverse, showcasing Meta’s headsets, glasses, and operating system. Despite reporting better-than-expected profit and revenue for the first quarter, investors reacted negatively to Zuckerberg’s new direction. This reaction led to a drastic 19% drop in Meta’s shares in extended trading, resulting in a staggering decrease of over $200 billion in market value.

During the call, Zuckerberg acknowledged the historical volatility in Meta’s stock when investing in new products before monetizing them. Meta currently relies on digital advertising for 98% of its revenue. However, Zuckerberg highlighted the potential future avenues for generating ad revenue, such as integrating ads or paid content into AI interactions. He introduced Meta Llama 3, the latest large language model, and discussed the company’s efforts to build a leading AI, including the launch of Meta AI as a competitor to OpenAI’s ChatGPT.

While Meta continues to invest in the development of the metaverse through its Reality Labs unit, the division has reported substantial losses, signaling ongoing challenges in this nascent industry. Despite setbacks, Meta’s stock price soared in the previous year, instilling investor confidence in Zuckerberg’s cost-cutting initiatives to enhance organizational efficiency. He outlined plans to increase capital expenditures for AI investments, projecting a significant growth in Meta’s investment capabilities over the coming years.

Despite the stock market’s reaction to Meta’s strategic shift, Zuckerberg expressed confidence in the long-term benefits of investing in AI and scaled experiences within Meta’s platforms. He acknowledged the ambitious nature of building a leading AI and the multiyear investment cycle required for these products to become profitable. Meta’s finance chief, Susan Li, echoed these sentiments, emphasizing the need to foster advanced models and scale products before realizing substantial revenue. The company’s light revenue forecast for the upcoming quarter tempered investor expectations but indicated a long-term commitment to innovation and growth.

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