$750K Meta Sell-Off: Big Tech’s Spending Frenzy Sparks Concern
In a significant portfolio reshuffle, a prominent investor has divested a substantial portion of their Meta holdings, citing concerns over escalating capital expenditures by major technology firms. This move, representing the largest single-day transaction in the investor’s public account history, underscores a growing apprehension about the long-term profitability and growth prospects of tech giants like Meta, Amazon, and Google amidst an unprecedented surge in spending.
A Historic Portfolio Shift
The investor announced a dramatic decision to sell Meta shares valued at over $750,000, marking the most substantial trading day for their public account, which dates back to 2018. This pivotal sale involved offloading 600 shares of Meta, a move that generated approximately $400,000. The divested shares included those acquired as far back as 2018, as well as purchases made during the market downturn in 2022. Despite this significant reduction, Meta remains the largest position in the investor’s portfolio, accounting for nearly 19% of its total value.
“This is the largest moving day in the history of the public account… Literally a historic video here today. This is the granddaddy of them all.”
Meta’s Shifting Fortunes and Spending Concerns
While the investor has realized substantial profits on Meta, with a total gain of $888,000 on an initial cost basis of $184,000, their outlook on the stock’s future upside has diminished. Previously, the investor envisioned Meta reaching $1,000 by 2026 and $2,000 before 2030. However, the company’s aggressive and seemingly uncontrolled spending on capital expenditures (CapEx) has tempered these expectations, transforming Meta into a “long shot” for such ambitious targets.
The investor highlights Meta’s projected CapEx for 2026, estimated between $115 billion and $135 billion. Given Meta’s operating cash flow of $115 billion last year, this level of spending suggests that nearly all operational cash could be funneled into CapEx, potentially leaving little to no free cash flow. This situation is not unique to Meta. A combined CapEx projection of $610 billion for Microsoft, Google, Amazon, and Meta in the coming years signals a significant escalation in investment across the big tech sector.
The CapEx Conundrum in Big Tech
The surge in CapEx is particularly concerning because it is not being met with commensurate, explosive revenue growth. While these tech giants are growing, their revenue increases are not typically in the 70-100% year-over-year range that would typically justify such massive investments. For instance, Meta’s net income grew by only 9% despite a robust 24% revenue increase in its latest reported quarter. Furthermore, increased Research and Development (R&D) spending, up 40% year-over-year, coupled with the depreciation of newly acquired assets (like AI chips over 5.5 years), is expected to put further pressure on net income and earnings per share (EPS) for years to come.
Analyst projections for Meta’s EPS growth show a concerning trend: expected growth rates are projected to slow significantly, with some quarters showing flat or even negative EPS growth in the near future. This trajectory raises questions about the sustainability of such high CapEx if revenue growth falters, especially considering these companies have been investing heavily for years without delivering truly exponential growth rates.
Revised Projections and Shifting Fundamentals
The investor has revised their projections for Meta downwards. Under a bull case scenario, with 22% average annual revenue growth and 10% net income growth from 2026 to 2029, the projected compound annual growth rate (CAGR) is a modest 6% to 11%. The base case scenario, anticipating 19% revenue growth and 5% net income growth, sees net income margins shrink from 29% to 18%, resulting in potentially flat returns.
The fundamental profile of Meta has shifted dramatically. Pre-2025, investors bought into a company with high-growth margins, significant free cash flow, and an asset-light model. Today, investors face declining margins, minimal free cash flow due to CapEx, and an increasingly asset-heavy infrastructure.
New Investments: ServiceNow and Salesforce
Amidst the Meta sell-off, the investor has initiated new positions in two Software-as-a-Service (SaaS) companies: ServiceNow and Salesforce. A $101,000 investment was made in ServiceNow at $101.37 per share. Despite the potential for short-term price declines, the investor believes ServiceNow is nearing a bottom and represents a generational buying opportunity. Projections suggest a potential CAGR of 31% to 45% in the bull case and over 20% in the base case, significantly outperforming the broader market.
Additionally, 600 shares of Salesforce were purchased at $185 per share. The investor expresses strong confidence in Salesforce CEO Marc Benioff, viewing him as a leader unlikely to face significant setbacks. Projections for Salesforce indicate a CAGR of 27% to 32% in the bull case and a mid-20s CAGR in the base case, also suggesting strong potential to beat the market over the next three to four years.
Market Impact and Investor Outlook
The substantial sale of Meta shares and the simultaneous investment in ServiceNow and Salesforce highlight a strategic pivot. The investor perceives the current market conditions for high-quality SaaS companies as a generational buying opportunity, contrasting it with the increasingly risky environment for mega-cap tech firms burdened by massive CapEx commitments. While Meta’s stock is trading at a relatively low forward P/E ratio, the increased risk profile and uncertain future upside have prompted a significant portfolio adjustment. The investor remains invested in Meta, acknowledging the possibility of Mark Zuckerberg’s long-term vision materializing, but emphasizes the substantially elevated risks.
The broader implications for the tech sector suggest that companies heavily investing in infrastructure, particularly for AI, may face prolonged periods of suppressed free cash flow and earnings growth. Investors will need to closely monitor revenue growth trends against CapEx spending and evaluate the long-term strategic execution of these tech giants. The shift towards companies like ServiceNow and Salesforce, with their recurring revenue models and deep integration into business operations, reflects a preference for businesses with more predictable and potentially higher sustainable growth trajectories.
Source: I Sold my #1 Stock🥺 (YouTube)
