Zuckerberg's Metaverse Dream and His Redemption

Today is a good lesson on investing for long-term investors. Shares of META tumbled, despite the company once again had beaten Wall Street estimates on its EPS and revenue. Why? Because Wall Street was more focused instead on Zuckerberg's plan to spend big on AI with META's products.

There's actually nothing wrong with the company's financials to rattle the investors. The Facebook and Instagram parent company META announced its first-quarter profit has more than doubled, boosted by higher advertising revenue and a 6% increase on the average price of ads on its platforms. But its shares dropped sharply in after-hours trading following revenue guidance that spooked investors.

META earned $12.37 billion, or $4.71 per share, in the January-March period. That’s up from $5.71 billion, or $2.20 per share, in the same period a year earlier. Revenue rose 27% to $36.46 billion from $28.65 billion.

Wall Street analysts were expecting earnings of $4.32 per share on revenue of $36.14 billion

META lost $200 billion in value in a single day. 😨

But the bloodbath on its share price gives ample opportunity to its long-term investors. Why the aversion to Zuckerberg's aggressive plan to spend a lot to dominate the generative AI revolution started by ChatGPT?

It was his failure to convince the world with his new vision some three years ago. There was a time before ChatGPT when the tech world was talking about something entirely different. Yes, it was the metaverse.

For a while it dominated tech news. He dreamt and planned a virtual reality world that would be so immersive, so engaging, that we would want to spend part of our lives in it.

Mark Zuckerberg drove the metaverse narrative and, in turn, drove him to obsession. He was so committed that in 2021 he changed Facebook's name to Meta. But two years later his vision of the metaverse is in trouble. His Reality Labs lost a staggering $21 billion. He failed but no one could accuse him of a lack of ambition.

Then along came ChatGPT. The tech world is obsessed with it ever since and started a generative AI revolution. Everyone including META jumped in to join the bandwagon. This AI revolution may well be Zuckerberg's redemption. His metaverse ambition three years ago was a bit premature but with the magic of generative AI, it may finally become a reality. That explains his aggressive attention to AI.

How is AI going to help the metaverse? By creating truly immersive experiences.

AI's ability to understand and replicate real-world physics, emotions, and interactions is pivotal in making the metaverse genuinely immersive. Advanced AI models can simulate realistic weather, infrastructure, conversations, and emotional responses from virtual characters.

This time, Zuckerberg may achieve his almost quixotic ambition and finally deliver another product of his genius like what he did twenty years ago inside his Harvard dorm where he created Facebook. 👍