Meta Platforms stock fell again Thursday on a report that the tech giant is hitting the pause button on AI-related hiring. The Facebook parent's shares are pacing toward their biggest weekly decline since April.
Meta stock lost 1.2% to close at 739.10 on the stock market today. Meta has fallen for four straight days and is down 6% so far this week. That would mark the stock's largest weekly decline since shares lost 7% the week starting April 18, when tariff concerns were weighing on the stock.
The stock retreat follows a big rally that saw shares climb roughly 40% from May through July. Meta stock is down about 4.5% in August.
Thursday's decline comes amid a busy week of AI news from the tech giant. Following a dizzying spending spree on AI talent, Meta is freezing hiring for its AI divisions, the Wall Street Journal reported late Wednesday. The tech giant is also splitting its AI division into four separate teams in a reorganization effort, Bloomberg reported Tuesday.
The maneuvering comes as investors are showing general unease about the recent AI-fueled market rally. AI stocks have been weighed down this week by an MIT report that showed limited enterprise AI returns so far, as well as comments from OpenAI's leader that investors may be "overexcited" about AI.
Chief Executive Mark Zuckerberg has pledged to invest huge sums pursuing the concept of superintelligence. He expects Meta's AI push can payoff through gains in engagement with its products, better advertising tools and products such as AI-enabled smart glasses. Meta stock surged following the company's second-quarter results, which showed a stronger-than-expected 22% jump in revenue.
Meta Stock Falls Below 21-Day
But Meta shares slid below the 21-day moving average Wednesday. Meta stock is hovering above the longer-term 50-day moving average, however.
Overall Meta stock remains ahead by more than 25% year-to-date. That trails only Nvidia and its 29.8% year-to-date gain for best performance this year among Magnificent Seven stocks. Nvidia is down about 3% this week.
BofA analyst Justin Post wrote in a client note earlier this week that Meta's reshuffling highlights the "strategic important and potential complexities" of Meta's AI push. He rates Meta stock a buy.
"While reshuffling may raise concerns on Meta's AI execution, the AI opportunity is still very early, and Meta has a track record of execution around new services," Post wrote.
But some analysts are warning investors to be wary of the rising costs from company's racing for AI leadership. Analysts with Morgan Stanley wrote on Monday that near-term labor costs are rising at firms like Meta, Oracle and Broadcom in the form of stock-based compensation. SBC risks dilution for investors.
"While dilution is not inherently negative if the hiring leads to innovation breakthroughs, persistent dilution without improved earnings potential could erode value," the Morgan Stanley research note said. "Going forward, investors may want to expand their AI spending scrutiny beyond capital expenditures to also include SBC when evaluating capital allocation decisions."
