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Meta was set to lose about $67 billion in market value, if
losses hold through the session, adding to the trillions of
dollars that some of the biggest tech names have shed this year
amid rising interest rates and a stronger dollar.
Meta itself has lost over half a trillion dollars in market
value this year. Its shares were trading at $104.60 before the
bell and set to open at their lowest in over six years.
Its results come a day after Google, Microsoft and Snap posted
dismal numbers, sparking a wide-spread selloff in tech stocks.
Analysts say the firm's spending towards capital-intensive
projects at a time when the ad market - its major source of
revenue - is drying up worried investors.
Meta expects to spend about $10 billion a year towards metaverse
hardware and software, with Chief Executive Mark Zuckerberg
saying on Wednesday he expects those investments to take about a
decade to bear fruit.
"Meta Horizon Worlds (at present) is a relative ghost town when
compared to other 3D immersive worlds like Roblox and Fortnite,"
said Mike Proulx, research director at Forrester.
CHIP BOON
One segment of the broader technology sector, however, stands to
benefit from Meta's aggressive spending - chipmakers.
Analysts expect data center-focused companies such as Broadcom
Inc, Advanced Micro Devices and Nvidia Corp to get a boost from
Meta's plans. Their stocks ticked higher in premarket trading.
Meta's plans require capital expenditure for new data centers
and infrastructure for the metaverse, said Ben Barringer,
analyst at Quilter Cheviot.
For Meta, however, things look bleak a year after it changed its
name to focus on metaverse, or shared virtual reality where
people can interact with each other through avatars.
So far this year, Reality Labs, the company's metaverse unit,
has recorded revenue losses of $9.44 billion after posting over
$10 billion in losses last year.
Meta forecast that the unit's losses would grow further in 2023
and pledged to "pace" investments after that.
At least 13 brokerages cut their price target on the stock, with
J.P. Morgan slashing to a Wall Street low of $115.
(Reporting by Medha Singh, Akash Sriram, Chavi Mehta and Sruthi
Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty)
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