A 91% slide in free cash flow keeps Meta's AI spending under scrutiny
Meta Platforms Inc. shares fell 4% on Monday after the company launched a business that will sell AI tools to enterprise customers. MongoDB shares dropped nearly 20% after news that its chief executive would leave to run the new unit.
The decline reversed a sharp rally in Meta shares over recent weeks. The success of Muse, Meta's new AI assistant, had shifted investor sentiment toward chief executive Mark Zuckerberg's AI spending.
The sell-off extended to software stocks, according to Dow Jones. Salesforce fell 4.7% at the open and Microsoft dropped 2.3%, while SAP, Germany's most valuable company, lost 3.4%.
Spending ahead of revenue
Zuckerberg wants to turn Meta's AI spending into new revenue outside its core advertising business. The company plans to spend up to US$145 billion in capital expenditure this year, much of it on data centre infrastructure and advanced models.
Meta lifted its 2026 guidance to that range of US$125 billion to US$145 billion, up from US$115 billion to US$135 billion.
According to FactSet, Alphabet, Amazon, Meta, Microsoft and Oracle moved in the 18 months to July from almost fully self-funded capital spending to raising outside capital at scale.
Meta's free cash flow fell 91% year over year to US$784 million in the second quarter of 2026, from US$8.55 billion a year earlier. Revenue in the same quarter rose 28% to US$60.8 billion.
Investors have reacted to Meta's AI spending before. In October 2025, Meta shares fell more than 11% in after-hours trading, their largest one-day loss since October 2022, after the company warned that 2026 expenses would rise significantly because of infrastructure investment and pay for new AI hires.
Zuckerberg has insisted that Meta's AI investments will support its advertising business while they also create new profit engines.
A new pillar for business clients
The parent of Facebook and Instagram said Meta Enterprise Platform will bring together its Muse personal assistant, its coding tools and access to its advanced AI models.
"We are starting the next major pillar of our business, Meta Enterprise Platform, to help businesses use AI to grow and transform in new ways as well," Zuckerberg said in a statement.
Chirantan "CJ" Desai will lead the unit and report directly to Zuckerberg. He had been MongoDB's chief executive for less than a year and previously served as chief operating officer at ServiceNow.
Desai said the unit will focus on the conversion of Meta's AI stack into products and services that companies can deploy for their own businesses.
"Our goal is to make Meta the place enterprises come to scale their businesses," he said.
On Monday, Zuckerberg told investors that Meta would "use our strengths," including its vast data centre infrastructure, to serve enterprise customers. He has previously discussed the sale of excess data centre capacity, a move that would put Meta in competition with cloud computing giants Amazon and Microsoft.
He did not state whether Meta had immediate plans to sell excess capacity, a step that rival SpaceX has taken through deals with Anthropic and Google.
In an August vision statement, Zuckerberg referred to a "dynamic auction mechanism" for compute access.
Analysts have compared the idea to the way Amazon Web Services and Microsoft Azure price computing resources, although Meta has not provided financial guidance on it.
Leadership risk at MongoDB
MongoDB named Dev Ittycheria interim chief executive after Desai's departure.
The company reiterated its financial guidance, and analysts and management pointed to operational stability after the leadership change.
Muse sets the pace
The Financial Times first revealed the development of Muse in May, and the app launched at the beginning of September. It has since become the most downloaded app on both the Apple and Android app stores in the US.
Muse offers consumers a team of autonomous bots that carry out tasks such as grocery orders, travel bookings and the organization of finances.
Last week, Zuckerberg unveiled a handheld AI "charm" device that will feature Muse, with new capabilities that include live conversations with the assistant.
One theme across client holdings
Canadian investors can hold Meta shares directly, through index funds or through CIBC's Meta CDR (CAD Hedged), which moved its listing to the Toronto Stock Exchange in February 2025.
As of May, the top 10 companies in the S&P 500 made up almost 40% of the index, and all but Berkshire Hathaway were directly tied to technology or AI. A UBS count of stocks that materially contribute to the index's performance fell to a record low of 42 in early May, while the typical level is about 100.
Josh Sheluk of Verecan Capital Management said index investors may not realize how concentrated their exposure has become.
"I probably wouldn't call it a problem, but I would say it's a risk," he said, and he pointed to equal-weight, active and value-based factor strategies as ways to diversify.
