Meta Stock Heads Under $600 as Metaverse Retreat, Layoffs, AI Costs Scare Investors
Investors are becoming increasingly concerned about whether investing billions in artificial intelligence instead of the metaverse will...
Quick overview
- Meta Platforms has started 2026 with a 6% decline in share price, reflecting investor skepticism about its strategic direction and cost control.
- The company is scaling back its metaverse ambitions, laying off 10% of Reality Labs staff, which highlights the failure to achieve acceptable returns on past investments.
- Meta's shift in focus to artificial intelligence has raised concerns about whether this will lead to improved profitability or simply extend its history of heavy spending.
- Despite strong revenue growth, rising costs and margin pressures are causing investors to question Meta's ability to demonstrate financial discipline and sustainable profitability.
Live META Chart
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Investors are becoming increasingly concerned about whether investing billions in artificial intelligence instead of the metaverse will actually increase profitability or just prolong years of high spending. As a result, Meta Platforms has started 2026 on shaky ground.
A Weak Start to the Year Signals Waning Confidence
Meta Platforms entered 2026 facing renewed skepticism, with its share price sliding roughly 6% so far this week. The stock has fallen for three consecutive sessions, drifting closer to the psychologically important $600 level as selling pressure accelerates. For many investors, the move reflects more than short-term volatility—it signals mounting concern over Meta’s strategic direction and its ability to control costs after years of aggressive spending.
The recent decline follows a period of relative stability late last year, suggesting that confidence remains fragile. Rather than rewarding Meta for repositioning its investments, the market appears to be questioning whether the company is merely shifting risk from one expensive bet to another.
Reality Labs Layoffs Highlight a Costly Retreat
At the center of the latest unease is Meta’s decision to significantly scale back its metaverse ambitions. The company has begun cutting roughly 10% of staff tied to Reality Labs, shutting down multiple internal studios and moving several acquired products into maintenance mode.
While management has framed these actions as pragmatic cost control, they also serve as an implicit admission that the metaverse vision has failed to deliver acceptable returns. Since 2020, Reality Labs has generated cumulative losses exceeding $70 billion—a figure that continues to loom large over Meta’s valuation.
For investors, the layoffs do not signal relief so much as confirmation that years of capital were sunk into initiatives with limited commercial payoff.
Savings Redirected, Not Recovered
Rather than flowing back to shareholders or materially improving margins, the savings from Reality Labs cuts are set to be redirected into artificial intelligence infrastructure under the banner of “Meta Compute.” This redirection has done little to reassure the market.
AI remains an intensely competitive and capital-hungry space, dominated by rivals with deep pockets and strong enterprise footholds. For Meta, reallocating spending from one loss-making segment to another high-cost arms race raises doubts about whether overall capital intensity will meaningfully decline.
Investors appear unconvinced that this pivot will generate near-term earnings acceleration, especially as AI monetization timelines remain uncertain.
AI Ambitions Grow as Capital Discipline Fades
Meta’s strategic messaging increasingly emphasizes AI as the company’s future growth engine. That narrative was reinforced by the late-year acquisition of Manus, a Singapore-based AI startup founded by Chinese entrepreneurs, reportedly valued at more than $2 billion.
The deal underscores Meta’s willingness to pay a steep premium for rapid growth and perceived technological leadership. Manus reportedly reached a $100 million annualized revenue run rate at remarkable speed, making it an attractive target on paper.
Yet the acquisition has also revived familiar concerns. Investors have seen this pattern before: bold purchases, aggressive integration plans, and rising expenses justified by long-term potential. The question is whether this time will be different.
Strategic Fit Does Not Equal Immediate Returns
Meta has indicated that Manus will continue operating while being integrated into its broader ecosystem, with potential applications across WhatsApp and other platforms serving small and medium-sized businesses.
While analysts have praised the strategic logic, markets have responded cautiously. Integration risk, regulatory scrutiny tied to the startup’s Chinese roots, and the lack of immediate financial contribution all temper enthusiasm.
The muted reaction suggests that investors are no longer inclined to extrapolate transformative outcomes from acquisitions without clear evidence of scalable profitability.
Market Reaction Reflects Deep-Rooted Skepticism
Although Meta shares briefly rose following news of the Manus deal, the bounce lacked conviction. The stock remains well below its autumn highs and has underperformed several megacap peers despite Meta’s central role in AI development.
Over the past year, Meta’s price action has been characterized by sharp rallies followed by equally sharp pullbacks, reflecting a market struggling to assign a stable valuation to a company caught between strong revenues and escalating costs.
The latest selloff reinforces the view that sentiment remains brittle.
Technical Damage Reinforces the Bearish Tone
From a technical perspective, Meta’s chart continues to flash warning signs. After peaking near $796 in early October, the stock broke down through multiple support levels, including the $600 zone.
Meta St0ock Chart Weekly – The 100 SMA Is Under Threat
While the 100-week simple moving average (green) has recently provided temporary support, the rebound has lacked follow-through. The 50-week moving average (yellow) has turned into resistance, rejecting recent recovery attempts and now sellers are threatening to break below the 100 SMA.
Meta St0ock Chart Monthly – The 20 SMA Has Been Broken
On a monthly basis, Meta has also slipped below the 20-month moving average (gray)—a development that historically points to prolonged periods of consolidation or further downside. Traders now increasingly discuss the risk of a move toward $500 if selling pressure intensifies.
Revenue Strength Masks Margin Pressure
Fundamentally, Meta’s business remains robust at the top line. Revenue grew 26% year-on-year in the most recent quarter, supported by resilient advertising demand and sustained user engagement across Facebook, Instagram, and WhatsApp.
However, profitability tells a less encouraging story. Earnings per share fell sharply, weighed down by higher operating expenses and a significant tax adjustment. More importantly, margins continue to compress as infrastructure investment and headcount growth offset revenue gains.
For valuation-focused investors, this imbalance is becoming harder to ignore.
Costs Rising Faster Than Comfort Levels
Total expenses climbed more than 30% year-on-year, driven by AI infrastructure buildouts, data-center investments, and ongoing losses in Reality Labs despite recent cuts.
Operating income remains positive, but the trajectory is troubling. Markets are increasingly intolerant of scenarios where cost growth consistently outpaces revenue growth—particularly for companies already valued at premium multiples.
Meta’s challenge is no longer about proving demand; it is about demonstrating restraint.
A Strategic Pivot Without a Margin Safety Net
Meta’s retreat from the metaverse and deeper push into AI mark a significant strategic shift, but not necessarily a simplification of its investment profile. Both paths require heavy upfront spending, long development cycles, and uncertain payoffs.
Investors had hoped that scaling back Reality Labs would restore confidence in management’s capital discipline. Instead, the rapid redeployment of resources into AI has raised fears that Meta is extending, rather than resolving, its core valuation problem.
Conclusion: Execution Risks Dominate the Narrative
Meta enters 2026 facing a more demanding and skeptical market. The company still commands enormous scale, powerful platforms, and strong revenue growth—but those strengths are increasingly overshadowed by concerns over spending discipline, margin erosion, and strategic clarity.
Until Meta can prove that its AI investments translate into sustainable profitability rather than prolonged cost pressure, its stock is likely to remain under strain. For now, investors appear unwilling to grant the benefit of the doubt—marking a notable shift for a company long rewarded for bold ambition.
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