shares Meta platforms(NASDAQ: META ) This week follows reports that the social media giant is delaying the release of its new custom artificial intelligence (AI) model.
according to The New York TimesThe model — codenamed Avocado — fell short of internal standards when compared to leading competitor models such as the alphabet and OpenAI. The company is even reportedly considering temporarily licensing Alphabet’s Gemini model to power its own AI products to fill the performance gap.
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For a stock that has commanded a premium valuation largely due to its perceived leadership in the AI race, the headline naturally spooked some investors.
But a step back reveals another reality. The following business is firing on all cylinders. And even more, management is already prepared for this exact scenario.
So, despite the pessimistic market reaction, is this dip a buying opportunity?
Image source: Getty Images.
While the lag of the flagship AI model isn’t ideal, it’s far from catastrophic for the meta. A company spokesperson noted that the company’s next model will show even faster development.
More importantly, investors shouldn’t be entirely surprised if the timeline for getting more advanced AI models is extended. Meta CEO Mark Zuckerberg publicly warned investors about this possibility two quarters ago.
In a call to investors last October, Zuckerberg outlined some potential details for this massive computer-building plan.
“If it takes longer, we’ll use additional computing to speed up our core business — which is capable of using a lot more computing than it should,” Zuckerberg explained. “And we’re seeing very high demand for additional accounting both internally and externally.”
The company has anticipated that the path to next-generation AI may not be entirely linear, and it’s prepared accordingly.
One of the biggest fears surrounding Meta’s big spending is that the company is overbuilt.
In January, Meta gave guidance for 2026 Investment $115 billion to $135 billion. To put these large absolute capital expenditure figures into perspective, the midpoint of this guidance range represents about 8% of the company’s total market capitalization. If traditional AI models are delayed, isn’t all that spending wasted?
Not exactly. The reality is that Metta’s core business — serving targeted ads on Facebook, Instagram and WhatsApp — is highly calculated anyway.
And this business is currently growing. In the fourth quarter of 2025, Meta’s revenue rose 24% year-over-year to $59.9 billion. This was primarily driven by an 18% increase in ad impressions and a 6% increase in average cost per ad.
In the worst-case scenario where the timeline for advanced AI is so delayed, Meta is simply building its infrastructure ahead of its needs — another concern Zuckerberg discussed in his third-quarter earnings call last year.
“And in the worst-case scenario, we’re going to have to slow down building new infrastructure for a period of time while we improve what we’re building,” Zuckerberg said.
Ultimately, I don’t believe this AI model delay is as bad for investors as the recent selloff suggests.
Meta is a highly profitable company with a sustainable core business. Yes, the company spends aggressively, but that spending is supported by $81.6 billion in cash and marketable securities and a proven ability to monetize user engagement.
With that said, value is always important. And the stock’s current value still assumes strong execution in its core ad business and its future AI efforts. A valuation like this leaves little room for error, therefore, if the underlying business slows while capital costs remain high.
Fortunately, Meta is guided for even faster revenue growth in Q1. The midpoint of its earnings guidance range implies 30% year-over-year growth. So I don’t think we should worry about a potential slowdown just yet. Still, the company’s growth trajectory will continue to be under close scrutiny as long as its capital expenditures remain high.
But for investors willing to wade through the near-term noise and accept the risks associated with a major technological transition, this dip looks like an attractive opportunity to initiate a small position in the stock.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. Motley Fool has and offers posts on Alphabet and Meta platforms. Motley Fool has a disclosure policy.
The stock of the meta platform has fallen on AI model concerns. Time to buy? Originally published by Motley Fool
