Meta's AI Gamble Faces Turbulence

Meta's significant investment in AI is facing internal and external pressures. A flagship AI model release is delayed due to engineers struggling to achieve necessary advancements, sparking concerns about the trajectory of Meta's multi-billion dollar AI investments. This delay has led to internal debates regarding whether the latest version justifies a public launch. Meta's stock experienced volatility, reflecting market sensitivity to the company's AI progress.

Despite these challenges, Meta is constructing two large data centres and may inject up to $600 billion into US infrastructure over the next three years. This level of expenditure has begun to create unease on Wall Street. Meta's AI strategy has undergone adjustments, postponing the release of its Llama 4 AI model due to performance issues and is reportedly developing a new Llama successor. The company is reducing investments in the metaverse, with potential budget cuts of up to 30% as part of its 2026 annual budget planning.

Adding to the financial strain, Meta faces regulatory risks, including potential penalties under the EU's Digital Services Act, which could consume a substantial portion of its free cash flow. Shifting content moderation policies increase the risk of heightened scrutiny, potentially impacting advertiser confidence. The coming months will be critical in determining whether Meta can effectively execute its evolving strategy and maintain its position in the competitive tech landscape.