Meta shares tumble as $10B AI investment heightens capex worries
El Paso data center expansion to 1GW by 2028 deepens concerns over free cash flow amid sector rotation
Meta Platforms shares tumbled 7.8% on Thursday as the social media giant's sixfold increase in artificial intelligence infrastructure spending amplified investor concerns about mounting capital expenditure and weakening free cash flow.
The company is boosting its investment in a West Texas data center to $10 billion from an initially planned $1.5 billion, according to CNBC. The El Paso facility, designed to scale to 1 gigawatt of power capacity by 2028, represents one of the largest planned data center campuses in the United States and will support Meta's growing AI workloads.
The steep investment hike comes as Meta has signaled it will spend between $115 billion and $135 billion on capital expenditures in 2026, a dramatic increase from $72 billion last year. Analysts project the company's free cash flow could decline by nearly 75% year-over-year, raising questions about the timeline for returns on such massive AI bets.
"Meta's $135 billion AI bet in 2026 could be a bust if the returns don't materialize quickly enough," noted The Motley Fool earlier this month. "The company is essentially betting its future on AI infrastructure that may not generate proportional revenue growth in the near term."
Despite the sharp share price decline, which erased roughly $45 in market value to around $549, Meta's fundamentals remain robust. The company maintains a $1.5 trillion market capitalization, trades at 25.3 times earnings, and delivered 23.8% year-over-year revenue growth in its most recent quarter. Profit margins stand at a healthy 30.1%, and the company generated $200.9 billion in trailing twelve-month revenue.
Analysts have maintained an average 12-month price target of $864, representing potential upside of roughly 57% from current levels. Of the 67 analysts covering the stock, 62 rate it a buy or strong buy, with only five recommending hold positions and none advising sell.
The El Paso data center, Meta's 29th overall and third in Texas, will operate on 100% clean and renewable energy and feature closed-loop liquid cooling to minimize water usage. The facility is expected to support 1,800 construction jobs at peak and create approximately 100 permanent operational roles, according to Meta's official announcement.
Thursday's selloff reflects broader market dynamics beyond the AI spending announcement. Meta was recently found 70% liable in a landmark social media addiction trial, adding legal overhang to the stock. More significantly, investors are undergoing what some analysts call a "Great Rotation" away from high-flying mega-cap technology stocks toward traditional industrial and cyclical companies.
"Investors are abandoning AI hype for the old economy in 2026," reported the Chronicle Journal. "After years of speculative growth driving tech valuations, the market is pivoting toward companies with tangible earnings and predictable cash flows."
The shift marks a sharp reversal from the AI-fueled rally that propelled Meta and other large-cap technology stocks to record highs in 2025. Meta shares reached a 52-week high of $794.38 in December before Thursday's decline pushed them well below the 200-day moving average of $690.61.
Meta's aggressive AI infrastructure build-out mirrors similar moves by competitors including Microsoft, Alphabet, and Amazon, all of which are racing to secure data center capacity and computing power for increasingly sophisticated AI models. The question for investors is whether these massive expenditures will translate into sustainable revenue growth or become a capital-intensive arms race with diminishing returns.
"The market is essentially telling Meta to show, not tell," said one portfolio manager who declined to be named. "They've seen the spending plans, but now they want to see the AI products and services that justify this level of investment. Until then, the stock is likely to remain under pressure."
With the El Paso data center not reaching full capacity until 2028, Meta will need to demonstrate progress on other AI initiatives—including smart glasses, AI assistants, and live translation tools—to justify the capital allocation and restore investor confidence.