Meta's $70B Metaverse Black Hole Signals Tech Bubble Warning — Is AI the Next Wipeout for Your Portfolio?

Meta's metaverse experiment has become one of the most costly failures in corporate history, with Reality Labs accumulating more than $70 billion (£52 billion) in losses since the start of 2021. Now, as Mark Zuckerberg shifts his focus aggressively towards artificial intelligence, retail investors face an uncomfortable question: are they about to watch history repeat itself?

The Facebook parent company is reportedly considering reducing its metaverse budget by up to 30% in 2026, with potential layoffs as early as January. Yet in the same breath, Meta's chief financial officer has warned that capital expenditure growth will be 'notably larger' next year as the company races to develop AI infrastructure.

For everyday investors holding Meta shares within their pension funds, this conflicting strategy warrants close attention.

The Staggering Cost of Zuckerberg's Virtual Dream

Meta's third-quarter 2025 earnings revealed that Reality Labs posted an operating loss of $4.4 billion (£3.2 billion) in just three months. The division's cumulative losses for the first nine months of 2025 reached $13.17 billion (£9.8 billion), according to the company's official financial statements.

The metaverse was heralded as the next computing platform. Instead, it has become a cautionary tale about corporate hubris. Virtual reality headsets remain niche products without compelling reasons to replace smartphones, while Horizon Worlds — Meta's social VR space — has struggled to retain users.

Shares responded positively on 4 December 2025 when reports of budget cuts emerged, a move interpreted as relief from investors who have long questioned the viability of the metaverse.

AI Spending: Safety Net or the Next Money Pit?

This is where your portfolio comes into the picture. Meta expects total expenses for 2025 to be between $116 billion and $118 billion (£86-88 billion), with capital expenditures reaching between $70 billion and $72 billion (£52-54 billion). The company has explicitly stated that 2026 spending will accelerate further, primarily driven by infrastructure costs and AI talent acquisition.

Zuckerberg himself framed the opportunity with optimism during the earnings call: 'If we deliver even a fraction of the opportunity ahead, then the next few years will be the most exciting period in our history.'

However, investors have heard similar bold promises before. The rebranding to Meta in 2021 was accompanied by grandiose rhetoric about leading 'the next computing platform.'

Why Retail Investors Should Pay Attention

The bull case for Meta hinges on Zuckerberg's proven ability to pivot when strategies fail. He embraced advertising in 2008 after initial resistance, bringing in Sheryl Sandberg when the company needed an 'adult in the room'. Around 2010, he abandoned the web-first approach and pivoted to mobile apps when that strategy proved wrong. Most recently, he launched the 'year of efficiency' in late 2022 after metaverse spending spiralled out of control.

Analysts modelling both scenarios—AI success and failure—suggest Meta could still represent reasonable value. One detailed analysis places a weighted valuation around $950 (£708), assuming a 65% probability that AI returns disappoint and spending is cut.

Nevertheless, the risks are substantial. Zuckerberg controls Meta through super-voting shares, which means shareholders have limited recourse if he refuses to change course. As one analyst noted: 'If he digs his heels in and says he will succeed in AI or take Meta down with him, there is not much we can do.'

Regulatory headwinds in both the EU and the US also add uncertainty, with youth-related trials scheduled for 2026 that may ultimately result in material losses, according to Meta's own disclosures.

The Bigger Picture for Your Money

Meta's core advertising business remains remarkably robust. In the third quarter, revenue hit $51.24 billion (£38.2 billion), up 26% year-on-year, with 3.54 billion daily active users across its family of apps. Ad impressions grew 14%, while average ad prices increased 10%.

Meanwhile, the company has found some success with wearables. Sales of Ray-Ban Meta smart glasses tripled by 2025, suggesting that the pivot towards AI-powered devices may offer a more viable path than immersive virtual worlds.

This advertising strength provides a cushion that pure-play AI companies lack. Yet, it also creates a dangerous comfort zone — where massive speculative spending can be justified by profitable legacy operations.

For retail investors, the lesson from Meta's $70 billion (£52 billion) metaverse hole isn't necessarily to sell. It's to understand exactly what you're investing in: a company betting your money on technologies that may take years to prove their worth, controlled by a single individual with an admitted appetite for expensive gambles.

The metaverse didn't wipe out portfolios because Meta's advertising machine kept generating significant revenue. Whether AI will follow the same pattern — or become an even deeper hole — remains the trillion-dollar question.

Disclaimer: Our digital media content is for informational purposes only and is not investment advice. Please conduct your own analysis or seek professional advice before investing. Investments are subject to market risks, and past performance does not guarantee future results.