Meta faces investor scrutiny over AI spending as capex outlook climbs

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Meta AI spending scrutiny

Highlights

Meta forecasts 2026 capital expenditures of $135 billion to $145 billion, nearly double 2025's $70 billion, raising investor concerns over AI ROI.
Meta's free cash flow has turned negative for the first time in over a decade, leading to a market backlash and a $37.5 billion stock offering.
Alphabet's $51.4 billion quarterly capex and two consecutive quarters of negative free cash flow drive sector-wide rotation from tech to value stocks.

Spending outlook drives pressure on Meta shares

As reported by CNBC, investor concern is centering on whether Meta's expanding AI investment can generate returns that justify its sharply higher capital spending. The analysis says Meta's stock has rallied back toward its fall 2025 peak this autumn, but relative performance against the S&P 500 has weakened, a sign that the recovery is lagging the broader market.

Meta's Oct. 21 report appears solid at first glance, with record revenue of $64.6 billion, up 26% and ahead of expectations. But capital expenditures consume more than half of quarterly revenue, and the company now expects 2026 capex of $135 billion to $145 billion, roughly double the $70 billion it spent in 2025.

The column says that surge in spending has pushed Meta's free cash flow negative for the first time in more than a decade, prompting a market backlash. Days after earnings, the company also launches a $37.5 billion stock offering to help fund its infrastructure build-out.

Broader hyperscaler concerns hit the sector

The pressure on Meta is unfolding alongside wider concern about AI spending across the largest technology groups. Alphabet also falls sharply after hours on Oct. 28 despite stronger Google Cloud revenue, as investors focus on $51.4 billion in quarterly capex, a second straight quarter of negative free cash flow, and guidance that spending will rise again in 2027.

That backdrop supports a broader rotation away from some technology names and toward more value-oriented sectors, according to the column's market view. While the commentary says the position in Meta was recently increased after a favorable reception for its Muse AI agent, it adds that holdings may need to be reduced if Wall Street's doubts over spending intensify.

In our earlier article on the U.S. AI data center buildout, we highlighted how the boom is running into rising financing costs, construction delays, and power constraints. We noted that only a portion of planned projects appears credible, and that cost overruns and tougher funding conditions are already testing investor confidence in the sector.

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