Meta Platforms (META) has been one of the loudest voices in the artificial intelligence race, aggressively recruiting top researchers, investing billions into data centers, and touting its ambition to achieve “superintelligence.” But the company’s latest shake-up signals a new chapter — one that raises questions about how efficiently Meta can turn its AI ambitions into shareholder value. According to recent reports, the company has halted hiring in its AI division and is undergoing a broader restructuring of the group. For investors, this development adds a new layer of complexity to the Meta story.
As Meta reshapes its AI efforts, the market is left to weigh whether these moves represent a strategic recalibration or an early warning sign. The answer could play a crucial role in shaping the trajectory of META stock in the months ahead. With that, let’s take a closer look.
About Meta Platforms Stock
Meta Platforms (META), previously known as Facebook, is renowned for its social media platforms like Instagram, Threads, and WhatsApp. These platforms generate significant revenue from advertising, allowing marketers to connect with a wide range of audiences. Meta’s emphasis on AI innovation supports its advertising capabilities, driving better results, improving efficiency, and keeping users more engaged with its applications. It has a market cap of $1.9 trillion.
Shares of the Facebook parent have climbed 29% on a year-to-date basis. However, Meta stock has pulled back from its all-time high near $800 in recent sessions, weighed down by concerns over the rapid pace of AI investments and a broader selloff in U.S. tech stocks.
Meta Puts the Brakes on AI Hiring
Meta Platforms’ AI hiring spree appears to have come to an end, at least for now. The Wall Street Journal reported last Wednesday that the company had halted hiring in its AI division. It marks a major shift after CEO Mark Zuckerberg spearheaded a hiring spree for AI developers with generous pay packages.
The hiring freeze also prohibits current employees from transferring between teams within the division, according to the report. The duration of the freeze was not disclosed internally. Exceptions to the hiring freeze may be possible, but they would require approval from Meta’s chief AI officer, Alexandr Wang, the WSJ said. Wang is a 28-year-old billionaire who previously led Scale AI, in which Meta acquired a 49% stake for $14.3 billion.
A Meta spokesperson confirmed the hiring freeze on Thursday, describing it as “basic organizational planning: creating a solid structure for our new superintelligence efforts after bringing people on board and undertaking yearly budgeting and planning exercises.”
Meta has been one of the most aggressive companies in the sector when it comes to poaching engineers and researchers to build out its AI division. The tech giant recruited dozens of AI researchers from OpenAI, Anthropic, and Alphabet’s (GOOGL) Google DeepMind, offering compensation packages of up to $100 million, according to OpenAI’s Sam Altman. The Journal said that analysts have raised concerns over the scale of the company’s investments, with some pointing to Meta’s rapidly increasing stock-based compensation costs as a possible risk to shareholder returns.
In an Aug. 18 research note, Morgan Stanley analysts cautioned that the rapidly increasing stock-based compensation offered by Meta to attract AI talent could undermine its ability to return capital to shareholders through buybacks. The analysts wrote that massive spending on talent “has the potential to drive AI breakthroughs with massive value creation or could dilute shareholder value without any clear innovation gains.”
Meta Restructures AI Division Once More in Its Push for Superintelligence
The AI hiring freeze, which reportedly went into effect two weeks ago, also coincides with a broader restructuring of the group. The New York Times reported last Tuesday that Meta announced internally it would split its AI division into four separate groups. One group will focus on AI research, another on developing a potentially powerful AI known as “superintelligence,” a third on products, and the last on infrastructure, including data centers and other AI hardware, the report said. The four groups fall under the umbrella of Meta Superintelligence Labs, a name that reflects Zuckerberg’s recent focus on building computer systems capable of outperforming the smartest humans in cognitive tasks.
It’s easy to see that Meta may need some time to figure out how to best coordinate all its new talent. The reorganization is likely to be the last for a while, the NYT said, citing two people with knowledge of the situation. The changes are intended to better structure Meta, enabling it to pursue its goal of superintelligence and accelerate AI product development to compete with other key players, the report said. With that, I believe these moves highlight management’s effort to balance efficiency with long-term innovation, while seeking to better leverage billions of dollars’ worth of recently acquired talent.
The NYT also reported that some AI executives are expected to depart. Meta is also considering downsizing its AI division, which has expanded to thousands of employees in recent years by either cutting roles or reallocating staff to other parts of the company. Still, the report noted that discussions remain fluid, with no final decisions yet made on the downsizing. A separate report from Bloomberg stated that the reorganization did not involve any layoffs.
Meanwhile, the NYT said that the chaos surrounding Zuckerberg’s superintelligence initiative has already pushed out some longtime leaders. Alongside former AI research head Joelle Pineau, who left Meta in April to join AI startup Cohere, new departures include Angela Fan, a research scientist who worked on Meta’s Llama open-source AI model and is now moving to OpenAI, and Loredana Crisan, a VP of generative AI who is joining software company Figma (FIG).
Is There an AI Bubble?
Meta’s sudden AI hiring pause and restructuring efforts come amid rising concerns of a potential AI bubble, with some comparing the current frenzy around the technology to the dot-com boom and bust of the 1990s. It was also recently reported that OpenAI CEO Sam Altman told a group of journalists he believes AI is currently in a bubble. Adding to the concerns, a recent MIT report found that 95% of companies implementing generative AI have struggled to achieve rapid revenue growth.
However, many tech analysts and investors reject the idea of an AI bubble, and so do I. Well, let’s start by focusing on the underlying fundamentals. The most important indicator of AI demand has been investment in computing infrastructure, and that shows no signs of slowing down anytime soon. For example, Meta raised the lower end of its full-year capital expenditure forecast and indicated that costs are expected to climb even faster next year, largely driven by investments in data centers needed to run AI models. Its Big Tech peers have either boosted their capex forecasts or kept them at elevated levels. Moreover, UBS analysts predict that global AI spending will reach $375 billion this year and increase to $500 billion by 2026.
With that, there are really no red flags suggesting an AI bubble, particularly since demand for AI infrastructure remains strong. It would be a different story if Meta or its Big Tech peers stopped building data centers, but the numbers currently show the exact opposite, so there’s no reason to worry. Notably, OpenAI Chief Financial Officer Sarah Friar told CNBC last Wednesday that the company’s biggest problem remains a shortage of computing power.
And here’s what some analysts have to say about a potential AI bubble and Meta’s AI hiring freeze:
“Altman is the golden child of the AI Revolution, and there could be aspects of the AI food chain that show some froth over time, but overall, we believe tech stocks are undervalued relative to this 4th Industrial Revolution,” said tech analyst Dan Ives of Wedbush Securities. He also downplayed the notion that Meta is significantly reducing its AI spending, explaining that the company is merely in “digestion mode” following a massive spending spree. “After making several acquisition-sized offers and hires in the nine-figure range, I see the hiring freeze as a natural resting point for Meta,” noted Daniel Newman, CEO at Futurum Group.
Meta’s AI Integration Fuels Growth
If the arguments above haven’t convinced you yet, let’s turn to Meta’s latest earnings report, released on July 30. Meta’s total revenue stood at $47.52 billion, up an impressive 21.6% year-over-year. The top-line figure beat expectations by $2.68 billion. Meta’s advertising revenue, the main driver of its total revenues, rose 21% year-over-year to $46.56 billion, driven by growth in ad impressions and a higher average price per ad. These numbers clearly demonstrate that the company’s AI investments are paying off. Meta’s direct integration of its technology into ad targeting is fueling top-line growth. In other words, AI is significantly improving ad targeting, as shown by an 11% year-over-year increase in ad impressions delivered in Q2, which in turn drives advertising revenue higher. Meanwhile, margin expansion and improved operational efficiency drove a 38% year-over-year EPS increase to $7.14, beating expectations by $1.24.
Looking ahead, Meta projects Q3 total revenue between $47.5 billion and $50.5 billion, implying 20.72% year-over-year growth at the midpoint.
What Do Analysts Expect for META Stock?
Wall Street analysts remain highly bullish on Meta, as reflected in a consensus rating of “Strong Buy.” Among the 55 analysts providing recommendations for the stock, 45 rate it as a “Strong Buy,” three as a “Moderate Buy,” six recommend a “Hold,” and one considers it a “Strong Sell.” Despite its strong YTD performance, META stock still has a 14.9% upside potential to its average price target of $866.92.
The Bottom Line on META Stock
Putting it all together, I don’t believe the sudden AI hiring pause and restructuring efforts are negative for Meta stock. Look, it’s important to understand that the number of AI researchers and engineers a company hires doesn’t necessarily determine future success. The hiring freeze and restructuring likely reflect Meta’s need for time to figure out how to best integrate all its newly acquired talent. The key now is to restructure in a way that enables all this new AI talent to work effectively as a team under Wang’s leadership. Looking more broadly, Meta’s business is fundamentally stronger than ever, with AI directly driving its top line, so the current buzz about an AI bubble, in my view, isn’t really a cause for concern.
