Meta Stock Struggles as Market Weighs AI Costs Against Uncertain Payoffs

2026-01-20 companies

Menlo Park, Tuesday, 20 January 2026.
Despite Threads surpassing X with 141.5 million daily mobile users, Meta shares remain under pressure as investors question the timeline for returns on billions in AI spending.

Market Valuation and Investment Skepticism

As of Tuesday, January 20, 2026, Meta Platforms Inc. (NASDAQ: META) is trading at $604.78, marking a significant decline from its position at the start of the year [6]. Since January 1, 2026, when the stock was valued at $660.09, shares have fallen by approximately -8.379 percent [4][6]. Despite maintaining a robust market capitalization of $1.56 trillion, the company faces intensifying scrutiny regarding the clarity of returns on its aggressive capital expenditures [4][1]. While the core advertising business remains strong, generating $50 billion in revenue during the third quarter of 2025 alone, the market is reacting to the company’s massive financial commitment to artificial intelligence infrastructure without a clearly defined timeline for profitability [8][1].

Escalating Costs and Infrastructure Bets

The central point of contention for investors lies in Meta’s escalating capital expenditure (capex) roadmap. After allocating $39 billion to capex in 2024, estimates for 2025 surged to a midpoint of $71 billion [8]. Furthermore, CFO Susan Li has signaled that this spending spree is far from over, stating that the expectation for capex dollar growth in 2026 will be “notably larger” than in 2025 [8]. This capital is largely being funneled into AI infrastructure, including a recent agreement with nuclear energy firm Oklo Inc. that triggered volatility in the partner’s stock [6]. However, this spending growth coincides with cost-cutting measures elsewhere; on January 13, 2026, the company laid off approximately 1,500 employees—roughly 10% of the workforce—from its Reality Labs division, a segment that analysts note continues to drag on overall profitability [6][1].

Analyst Sentiment and Competitive Landscape

Despite the current bearish price action, Wall Street sentiment remains divided but leans toward long-term optimism. Mizuho analyst Lloyd Walmsley named Meta a top internet idea for 2026, maintaining a buy rating with a price target of $815, citing potential for positive revisions as the company demonstrates AI returns [3]. The consensus price target sits at $822.96, suggesting a potential upside of approximately 36.076 percent from current levels [4][6]. From a valuation perspective, Meta appears relatively inexpensive compared to its peers; its price-to-earnings (P/E) ratio of 27.40 is significantly lower than the Computer and Technology sector average of 78.03 [4][6].

Operational Wins Amidst Regulatory Headwinds

On the operational front, Meta has achieved a significant milestone against its rival X (formerly Twitter). Recent data shows that Meta’s Threads app has surpassed X in daily mobile usage, attracting 141.5 million daily active users compared to X’s 125 million [7]. However, X retains a commanding lead on the web, with 145 million daily visits versus roughly 8.5 million for Threads [7]. These user engagement victories are tempered by mounting regulatory challenges. As of January 20, 2026, the UK Gambling Commission has accused Meta of allowing illegal gambling operators to advertise on its platforms, and the company faces potential fines in Australia related to social media bans for individuals under 16 [6]. Investors will likely look to the next earnings report, estimated for January 28, 2026, for clarity on how these regulatory issues and capital expenditures will impact the bottom line [4].

Sources

Capital Expenditure Tech Stocks