Meta Platforms (META) stock is down 10% this year and has fallen 25% off its all-time high of $796 last August. The business operates some of the world's largest social networks, including Facebook, Instagram, and WhatsApp. According to the company, nearly 3.6 billion people use at least one of Meta's social media apps every single day, which is close to half the entire global population. Advertising revenue reached approximately 98.7% of total revenue in 2025, so it dominates its earnings. With that many ‘eyeballs’ on its platforms, it has become the go-to place for companies spending on advertising.

It's becoming harder for the company to find new users, which may threaten the long-term potential growth of its business. As a result, management is focusing on boosting engagement instead. If users spend more time on Meta's apps each day, they will see more ads, which leads to more revenue.

AI is central to that strategy. Advanced algorithms learn what type of content each user likes to see on Facebook and Instagram, and it feeds them more of it to keep them online for longer periods of time. It's been working well as AI-driven improvements in content recommendations led to higher engagement across Instagram and Facebook, notably in video, where Instagram watch time grew over 30%. Over 1 billion users are actively using Meta AI every month, according to the company.

CEO Mark Zuckerberg believes all users will eventually have their own AI agent that learns about their personal interests over time and curates their entire social media experience. The agent will also be capable of creating content for users to post or share with friends, which could drive an increase in activity.

Fourth quarter revenue rose roughly 24% year over year, driven by robust ad pricing and higher impressions across Facebook, Instagram, and WhatsApp. With 7% user growth, 18% gain in ad impressions, and improving AI engagement, why are META shares in bear market territory? While the stock is not immune to market volatility and overall market weakness, it may all come down to spending.

Meta (META) announced in late January 2026 that it expects capital expenditures (capex) in 2026 to be in the range of $115 billion to $135 billion. This massive investment is largely driven by building infrastructure for AI, including data centers and AI training for "superintelligence" efforts, and marks a significant increase from the estimated 2025 capex of $72 billion. That level of investment is compressing free cash flow and pressuring margins, even as revenue grows. Investors are also wary of the billions of dollars spent on the Metaverse, which has potentially dented the trust on their big spending plans.

With the fall in the stock to the $594 level as of yesterday’s close, valuation has come into the picture. The 12-month forward P/E is just under 20 times, with the trailing P/E near 25. Both these figures are far below historical levels and Meta has become the cheapest Magnificent 7 stock on a valuation basis. The shares have found support near $585 over the last few months but remain below its 50 and 200-day Simple moving averages.

Meta’s shares aren’t trending lower for weak growth but most likely due to its spending spree. Until investors gain confidence that massive AI investments can deliver durable returns without eroding margins, the stock may remain under pressure even as fundamentals stay strong. Meta Platforms may once again be a show-me story before it can bust out of the penalty box.

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