As Meta dips following results, the tech crisis gets worse
- Tech News
- October 28, 2022
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As Meta’s shares dropped 20% following the metaverse gamble and investors became alarmed by ad expenditure, the carnage in US technology equities grew.
The carnage in US technology stocks widened on Thursday as shares of Meta Platforms Inc plunged 20% after expensive bets from Facebook’s parent company and the impact of soaring inflation in advertising spending on investors.
Meta was expected to lose about $67 billion in market value if losses persist during the session, adding to the trillions of dollars lost by some of the biggest tech names this year amid rising interest rates and a stronger dollar.
The Company has lost more than half a billion market value this year. Its shares were trading at $104.60 before the bell and will open at their lowest level in more than six years.
His results came after Google, Microsoft, and Snap released dismal numbers, prompting a sell-off in technology shares.
Analysts say the company’s spending on capital-intensive projects comes when the advertising market, its main source of income, is drying up anxious investors.
Meta expects to spend about $10 billion annually on the metaverse’s hardware and software. CEO Mark Zuckerberg said Wednesday that he expects those investments to take about a decade to pay off.
“Meta Horizon Worlds is (currently) a relatively ghost town compared to other immersive 3D worlds like Roblox and Fortnite,” said Mike Proulx, Forrester Research Director.
However, a slice of the broader tech sector will benefit from Company’s massive spending: chip makers.
Analysts expect data centre-focused companies such as Broadcom Inc, Advanced Micro Devices and Nvidia Corp to get support from plans. Its shares rose in pre-market trading.
Ben Barringer, an analyst at Quilter Cheviot, said plans call for capital expenditures for new data centres and metaverse infrastructure.
But for the Meta, things look bleak a year after it changed its name to focus on the shared virtual reality where people can interact with each other through avatars.
So far this year, Reality Labs, the company’s unit, has posted a revenue loss of $9.44 billion after reporting more than $10 billion in losses last year.
Meta predicted the unit’s losses would grow further in 2023 and pledged to “cool down” investments thereafter.
At least 13 brokerages have cut their target price for the stock, with J. Morgan cut to a Wall Street low of $115.
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