Lawrence McDonald, founder of the Bear Traps Report, issued a stark warning on Monday about Meta Platforms Inc. (NASDAQ:META), writing on X: “Imagine (Zuck) losing billions on a metaverse bet, and then going all in AI capex? Testosterone can be lethal.”
McDonald Warns of ‘Testosterone’ Driven Spending
McDonald’s comment came in response to Speedwell Research data showing Meta’s depreciation-to-capex ratio increased to 3.8x from 2.2x, indicating potential earnings overstatement.
CapEx Intensity Reaches Critical Levels
Meta’s capital expenditure has skyrocketed from $1 billion (17% of revenue) in 2013 to a projected $69 billion (36% of revenue) in 2025E. The most dramatic acceleration occurred post-2022, with spending jumping from $14 billion to $54 billion in the last twelve months.
The company’s CapEx-to-revenue ratio surge suggests prioritizing long-term infrastructure over near-term profitability as Meta pursues “Super Intelligence” capabilities across its platforms.
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Reality Labs Burns Cash Despite Premium Talent Costs
Meta continues hemorrhaging money on metaverse development, reporting $5 billion in Reality Labs operating losses last quarter. The company pays VR developers $600,000 to nearly $1 million annually—double typical gaming industry compensation, according to Andiamo CEO Patrick McAdams.
Average compensation for Meta’s VR developers reached $540,000, significantly exceeding Apple Inc. (NASDAQ:AAPL) at $500,000 and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) at $440,000.
Mathematical Depreciation Concerns
Speedwell Research highlighted that rising depreciation-to-capex ratios “mathematically” guarantee continued depreciation increases, potentially inflating current earnings figures as infrastructure investments age.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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