Meta's AI Bet: Is It Time to Catch the Falling Knife or Avoid the Pitfall?

In the fall of 2025, Meta Platforms Inc. (META) finds itself at a crossroads. The company's aggressive $70–72 billion capital expenditure plan for AI infrastructure-a 12% stock plunge following its Q3 earnings report-has sparked a heated debate among investors. Is this a reckless gamble by a once-dominant tech giant, or a visionary bet on the future of artificial intelligence? To answer this, we must dissect Meta's AI strategy through the lenses of strategic viability, competitive positioning, and financial risk.

Strategic Viability: Building for a Future That May Not Arrive

Meta's AI investments are anchored in a long-term vision of "superintelligence," a concept CEO Mark Zuckerberg has championed as a potential paradigm shift. The company's Q3 2025 earnings report revealed a staggering $19.37 billion in capital expenditures for the quarter alone, with full-year spending projected to reach $72 billion-a 40% jump from 2024-primarily to fund data centers and AI model training, according to Meta's Q3 report. This includes a $14.2 billion contract with CoreWeave to access Nvidia's GB300 AI systems, powering products like Ray‑Ban smart glasses, as reported in the CoreWeave deal.

Zuckerberg has framed these investments as "front-loading" for a future where AI becomes a core utility, akin to the internet's rise in the 1990s. "If superintelligence arrives sooner than expected, we'll be ready," he told analysts, according to a NewsBytes report. Yet, the immediate reality is less rosy. Meta's Reality Labs division, which oversees AI and metaverse projects, posted a $13.2 billion operating loss in the first three quarters of 2025, according to a Nasdaq article. This raises a critical question: Can Meta sustain such losses indefinitely while its core ad business-responsible for 98% of revenue-faces slowing growth?

Product Development: Promises vs. Payoff

Meta's AI product lineup remains a mixed bag. While its AI assistant claims over a billion users (largely inherited from Facebook and Instagram), tools like the Vibes video generator and Vanguard smart glasses are still seen as experimental, according to a PredictStreet deep dive. The company's Superintelligence Lab, launched in 2025, aims to develop next‑gen models but has yet to produce a commercially scalable product.

In contrast, competitors like Google and OpenAI have clearer monetization pathways. OpenAI, for instance, generates $20 billion annually from enterprise AI tools, according to that same deep dive, while Nvidia's Blackwell chips-used in Meta's CoreWeave deal-are already driving revenue for data centers globally. Meta's reliance on third‑party hardware (e.g., Nvidia's GB300) also exposes it to supply chain risks and pricing pressures, unlike vertically integrated rivals like Apple.

Investor Skepticism: A Market Unwilling to Wait

The stock market's reaction to Meta's AI bets has been tepid at best. Following the Q3 earnings report, shares fell 12%, erasing $200 billion in market value, a decline highlighted in the PredictStreet deep dive. Analysts have criticized the company for prioritizing "higher costs now for uncertain future returns," a phrase repeated in a recent TradersUnion report. The one-time $15.9 billion tax charge and 83% drop in earnings per share (EPS) further fueled concerns, the TradersUnion report added.

Yet, Meta's ad business remains a lifeline. Q3 revenue hit $51.24 billion, with ad sales growing 26% year-over-year, according to a DesignRush article. This cash flow allows the company to absorb losses in Reality Labs, but it also creates a dependency: If ad revenue falters-due to regulatory pressures or shifting consumer behavior-Meta's AI spending could become untenable.

The Path Forward: Can Meta Justify the Bet?

For Meta's AI strategy to succeed, it must demonstrate two things: 1) that its infrastructure investments will yield scalable products (e.g., enterprise AI tools, immersive metaverse applications), and 2) that these products can generate revenue to offset current losses. The $14.3 billion investment in Scale AI-and the hiring of top talent from OpenAI and Google-suggest the company is doubling down, according to NewsBytes.

However, the window for proving this is narrowing. As Viktoras Karapetians, a financial analyst, notes, "Investors reward discipline and punish overpromises. If Meta can't show tangible progress by 2026, the stock may not recover."

Conclusion: A High-Risk, High-Reward Proposition

Meta's AI bet is a classic case of "catching a falling knife." The company's long-term vision is ambitious, and its infrastructure investments position it to compete in an AI-dominated future. Yet, the lack of immediate monetization, coupled with investor skepticism, makes this a high-risk proposition. For risk-tolerant investors, Meta's stock could rebound if it delivers a breakthrough product. For others, the current valuation may still reflect a company chasing moonshots at the expense of near-term stability.

In the end, the answer to the central question-catch the falling knife or avoid the pitfall-depends on one's time horizon and appetite for volatility. For now, Meta's AI journey remains a work in progress, with the next 12–18 months likely to determine its fate.