Michael Burry, a well-known investor recognized for his contrarian perspectives, has issued a strong cautionary statement concerning Meta Platforms Inc. (NASDAQ:META) in light of its recent announcement to embark on a substantial artificial intelligence (AI) buildout. This development was disclosed by Meta’s CEO, Mark Zuckerberg, who outlined plans to construct hundreds of gigawatts of AI capacity under a new initiative termed 'Meta Compute.'
On a social media platform this past Monday, Burry sharply criticized the strategy, suggesting that Meta is abandoning its primary advantage by pursuing this route. He specifically warned investors to "watch ROIC crash," alluding to the company's expected deterioration in key financial efficiency metrics.
Historically, Meta has been regarded as an asset-light software enterprise, leveraging its dominance in code development and digital advertising with relatively minimal investment in physical infrastructure. This advantage allowed the company to achieve outsized profits due to its highly capital-efficient model.
However, the new focus on Meta Compute signifies a marked shift. According to reports, Meta is preparing to allocate around $600 billion in capital expenditures through the year 2028. These funds will be invested in expanding data centers, upgrading energy grids, and developing custom semiconductor chips designed to support their AI ambitions.
Such a massive capital commitment transitions the company into a capital-intensive business model, which Burry views with skepticism. The Return on Invested Capital (ROIC) metric, commonly used to gauge how effectively a company converts invested money into profitable outcomes, is expected by Burry to experience a sharp decline due to the rapidly increasing denominator represented by these investments.
Previously, Meta’s value generation was driven mainly by software and advertising inventory—elements requiring comparatively little physical asset investment. With the substantial new focus on physical infrastructure, Burry foresees a degradation in the efficiency of Meta’s business operations.
In his assessment, Zuckerberg has capitulated to the broader industry trend of escalating investment in AI capabilities, a development that Burry considers a high-risk gamble that jeopardizes Meta’s prior status as a highly lucrative, asset-light digital enterprise.
While most market participants are still digesting the scope and implications of the Meta Compute initiative, Burry stands out as one of the few prominent voices openly expressing caution and concern about the company’s trajectory under this strategy.
Reflecting investor sentiment amid these developments, Meta’s stock price declined by more than 2% on Tuesday, trading around $628.13 based on data from Benzinga Pro.
This significant capital investment signals a transformation for Meta, transitioning from a software-first model toward a more physical asset-dependent structure in pursuit of AI leadership. Market watchers will be closely monitoring how this shift impacts Meta’s financial performance, particularly its ROIC, over the coming years.