Meta (NASDAQ: META) stock’s been a fantastic investment in recent years. However, in the last week it’s come unstuck, falling about 14% Now, this is one of the few Magnificent 7 stocks I don’t own currently. Should I buy it for my ISA after this double-digit percentage fall?
What’s behind the fall?
Meta stock fell sharply after the social media company posted its earnings for the third quarter of 2025 last week. The results weren’t bad. In fact, they’re well ahead of estimates. For the period, revenue came in at $51.2bn (up 26% year on year) versus $49.4bn expected while earnings per share amounted to $7.25 versus $6.69 expected.
What spooked investors however, was Meta’s artificial intelligence (AI) spending plans. Not only did the company raise its capital expenditure guidance for 2025 to $70bn-$72bn but it said total expenses will grow significantly faster in 2026. Additionally, the company said it will raise $30bn in debt to pay for AI infrastructure.
This brought back memories of Meta’s huge spend on the metaverse a few years ago (which arguably wasted a lot of money). The issue here is that unlike companies like Alphabet and Amazon, Meta doesn’t have a cloud computing division. So return on investment from AI spending is far more uncertain.
The fact that the company’s using debt to pay for AI infrastructure no doubt spooked a lot of investors too. This is reminiscent of the dotcom bubble, when telecoms companies embarked on a massive spending spree using debt to lay millions of miles of fibre optic cable.
Reasons to buy
Zooming in on Meta, I can see both pros and cons of buying it for my ISA. On the plus side, as the owner of Facebook, Instagram, and WhatsApp, the company’s a social media powerhouse. Today, there are few companies in the world that have the reach of Meta.
Meanwhile, it’s already benefitting from AI. Using the technology, the company has been able to enhance its digital advertising services significantly (eg predicting which ads a user will be interested in).
It’s also starting to have success with its smart glasses. In the long run, CEO Mark Zuckerberg believes this technology could replace smartphones.
Finally, the valuation looks relatively low. Right now, the stock trades on a forward-looking price-to-earnings (P/E) ratio of 23.5.
Reasons to avoid it
On the downside, this company isn’t as diversified as some of the other Mag 7 companies. As I said above, it doesn’t have cloud computing. This could make it more vulnerable to AI. For example, if people start spending more time on ChatGPT, Meta’s social media platforms could lose eyeballs.
I also have some concerns around ethics. You see, Meta’s algorithms are designed to maximise time spent on its platform and this can lead to all kinds of mental health issues including addictive behaviours, anxiety, and depression.
It’s worth noting that Australia is shortly about to introduce a social media ban for those under 16. This is designed to protect children’s mental health.
My move now
Weighing everything up, I’m going to pass on Meta stock for now. I do think it looks cheap, but the risks around AI spending and disruption, and the ethical issues, are a turn-off for me.
Ultimately, I’d rather focus on other growth stocks.
