TL;DR: Meta has lost the A.I. race, Zuckerberg’s revealing WSJ Op-ed, encroaching and enormous lawsuits, deteriorating culture
2 minute read
In 2 hours, Meta will release its Q2 2026 financial results, after the market close. In the 4:30pm conference call we will hear:
-Expected revenue and EPS estimates
–Key AI and capital expenditure metrics
The financial world is divided concerning how Meta’s stock price will react, but most investors are bullish. The current price is 592/share. Yahoo Finance claims the stock price will pop/increase. Some investors (such as Guggenheim’s analyst Michael Morris) even predict a future ~$800 valuation.
I am predicting that the stock will fall below 550, perhaps even to 525. In the long run, I am short Meta, predicting that in 4-6 years the stock price will be 250-300. Below are my four, macro reasons:
1.) Meta has lost the A.I. race, won’t be able to catch up with OpenAI, Anthropic, or even xAI, and is burning cash on A.I. infrastructure.
2.) Yesterday, Mark Zuckerberg published an essay in the Wall Street Journal entitled The AI Future Is for Everyone. I believe that part of his motivation for this article was to prepare investors to swallow the bitter pill of increased capital expenditures on A.I.. He closes his essay with:
‘Developing superintelligence will be the most profound technological advance we will see in our lifetimes. Meta is committed to building with the principles of individual empowerment [italics added], invention and balance of power. The arc of human history has bent toward putting more power in people’s hands. If these values lead the way, then I am optimistic that we can build a positive future for everyone.’
‘Committed to building’ is another way to say, ‘please let us keep recklessly plowing money into A.I. infrastructure even though we’re losing this race because this is important for humanity.’
3.) Meta says US states are seeking $1.4 trillion in penalties in August youth safety trial. [Rueters]. They already lost an important trial this past spring, being found negligent for the depression and anxiety of a woman who compulsively used social media, awarding her $6 million. That’s not good. The consensus amongst my family and friends is that while social media is useful, it is addicting and toxic, and should be used in moderation. I also see this trend in my business students. The increasing moderation amongst users will hurt Meta’s growth.
4.) I personally know a few people who have worked for Meta. Let’s call them Person A and Person B. I went to college with Person B. They dropped out, came back, and was a fairly narrow, unremarkable troublemaker. A friend of a friend helped him get a job at Meta, and he has worked there for 8 years, surviving the layoffs. Person A is one of the most capable, creative, driven people I know. He was recently laid off at Meta (when 10% of the workforce was laid off this past spring, 8000 employees fired). He shared with me the toxic culture within Meta, which has already been documented. Obsession with A.I.. The crazy emphasis on automation and flywheels on flywheels on flywheels. High-pressure.
Once a company starts keeping the bad eggs and firing the good eggs (Person A is an inventor and was NOT empowered by Meta’s A.I. push), once the culture becomes toxic and unable to valorize the stellar employees, this is a recipe for long-term stagnation.
In the 4:30pm conference call, I predict capital expenditures to be raised to $140-$150 billion, no clear AI monetization narrative, and comments implying another major spending acceleration in 2027. Their revenue will be high (20% increase from the previous quarter). But Mark Zuckerberg will not clearly say how quickly Meta’s massive AI infrastructure investments are beginning to generate measurable returns.
Sell Meta. Social media is useful and connects us, but should not have a market capitalization of ~$1.5 trillion, but rather $800-900 billion.