Meta's Muse and Stock Conquer AI Spending Fears-for Now

Dow Jones
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Since Meta Platforms released its artificial-intelligence agent Muse on Sept. 8, the tech giant's stock has risen 24% and the Muse app has quickly became one of the most popular downloads in app stores.

Adding to the excitement, Meta on Monday unveiled a new pair of AI models, dubbed Muse Wonder and Muse Wonder Full, to rival top offerings from OpenAI and Anthropic.

How Meta will monetize Muse, however, remains an open question, and Wall Street has been increasing its estimates of how much Meta will spend on AI next year. The consensus currently forecasts Meta's 2027 capital spending at $193.88 billion, according FactSet. Since the end of August, the consensus on spending has risen only about 1.2%, but recent estimates have been revised higher.

Meta stock fell 2.2% to $746.87 on Wednesday and was about 5.8% below its record closing high of $790.

Guggenheim analyst Michael Morris on Wednesday raised his estimate for Meta's 2027 capital spending to $225 billion, up from his previous $203 billion.

"The prevailing concern is that a rival leapfrogs Muse or Wonder and locks Meta into a perpetual over-investment cycle," Morris said in the research note, adding that the increased AI spending forecast reflects Meta funding "these opportunities."

Truist Securities analyst Youssef Squali projected Meta's 2027 annual capital spending will increase 32% to $190 billion, up from his previous estimate of $180.11 billion.

Deutsche Bank analyst Benjamin Black in late September noted that Meta had been building up its infrastructure to accommodate a "scaled consumer agent rollout" and that "most models are already burdening the company for ramped" capital spending in 2027. Black estimated that capital spending would amount to roughly $25-$50 per Muse user.

Bank of America analyst Justin Post said in a Wednesday research note that increased investor concerns around 2027 capital spending could be a risk for the stock, particularly if growing Muse usage requires additional infrastructure capacity. Even so, Post is apparently not overly concerned: He has a Buy rating on the stock with a price target of $810.

Wall Street will likely get a firmer answer on capital spending when Meta reports third-quarter earnings on Oct. 21.

Guggenheim's Morris expects investors to focus on initial 2027 investment commentary; 2026 spending guidance of $130 billion to $145 billion implies a significant spending increase in the second half of the year and into 2027.

"Meta will continue to aggressively scale AI infrastructure to support both core advertising improvements and consumer AI product launches. We expect free cash flow to remain pressured through 2028 with return to positive growth beginning in 2029," Morris said.

 

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