"There is talk of a bubble forming in artificial intelligence (AI), fueled by huge spending on the technology. One stock that has seen the brunt of the market's worry about hefty AI spending is Meta Platforms . The company is starting to extend itself a bit by spending more money than its cash flows are providing, requiring it to take on debt to fund its aspirations."
"The company also has a Reality Labs division that's focused on bringing augmented reality and virtual reality devices to the consumer, although this segment has been a money pit. Management spends far more on this division than it generates, but it's more than made up for by its strong ad business. In the third quarter, $50.1 billion of its $51.2 billion in total revenue came from ads."
Markets show growing nervousness about heavy AI spending and talk of a possible bubble. Meta Platforms is spending beyond its cash flows, taking on debt to finance ambitions, and its stock sits roughly 20% below its all-time high. Meta's core ad business dominates revenue and profit, with $50.1 billion of $51.2 billion in third-quarter revenue coming from ads and the Family of Apps producing $25 billion in operating profit. Reality Labs has been a persistent money-loser, losing $4.4 billion, though management hopes generative AI-enabled consumer devices such as smart glasses could reverse those losses, without guarantee.
Read at The Motley Fool
Unable to calculate read time
Collection
[
|
...
]