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The weakest consumers are increasingly struggling, and debt investors are starting to take notice.

While many asset-backed securities tied to subprime auto lending are relatively steady, risk premiums have surged in some of the lowest-rated bonds over the last three months, widening by 0.75 percentage point over Treasuries, according to JPMorgan Chase & Co.

• In the past week, Meta Platforms announced the layoff of about 600 employees from its artificial intelligence and Superintelligence divisions, following CEO Mark Zuckerberg’s push to accelerate AI development after mixed results from recent language model releases.

• At the same time, Meta is moving forward with major investments in new data centers and infrastructure partnerships, highlighting a clear shift from its earlier focus on the metaverse to artificial intelligence as its central area for growth and efficiency.

• We’ll examine how Meta’s simultaneous workforce restructuring and expansion of AI infrastructure could reshape its investment narrative heading into earnings season.

AI is about to change healthcare. These 33 stocks are working on everything from early diagnostics to drug discovery. The best part – they are all under $10b in market cap – there’s still time to get in early.

To own Meta Platforms, you have to believe its pivot to AI will drive sustained growth in advertising and new revenue streams, while keeping expenses and margin pressure in check. The recent layoffs in Meta’s AI and Superintelligence divisions may streamline decision-making, but do not appear material to the company’s biggest near-term catalyst, successful AI-driven ad monetization, nor to the most important risk, which remains escalating capital expenditure outpacing revenue growth.

Among the latest announcements, Meta’s joint venture with Blue Owl Capital to fund the $27 billion Hyperion data center stands out. This move reinforces Meta’s commitment to AI infrastructure and may help fuel future engagement and advertising gains, tying directly into the company’s main catalyst: enhanced AI-enabled ad performance.

By contrast, what investors should not overlook is how much Meta’s rising data center and AI spending could start to …

Read the full narrative on Meta Platforms (it’s free!)

Meta Platforms’ outlook anticipates $275.9 billion in revenue and $92.1 billion in earnings by 2028. This is based on an expected annual revenue growth rate of 15.6% and a $20.6 billion increase in earnings from the current $71.5 billion.

Uncover how Meta Platforms’ forecasts yield a $863.20 fair value, a 17% upside to its current price.

Fair value estimates from 100 Simply Wall St Community members range from US$538 to over US$1,100 per share. Many are closely watching whether Meta’s surge in AI and data center investment translates into sustainable profit growth or places further pressure on cash flows.

Explore 100 other fair value estimates on Meta Platforms – why the stock might be worth as much as 49% more than the current price!

Disagree with existing narratives? Create your own in under 3 minutes – extraordinary investment returns rarely come from following the herd.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include META.

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