Meta CEO Mark Zuckerberg Just Delivered Fantastic News for Nvidia Investors

Since Meta Platforms (NASDAQ: META) published third-quarter earnings results on Oct. 29, shares have plummeted by 17%. The influence behind the sell-off surrounds one factor above all else: spending.

Below, I'll break down why investors are keeping such a keen eye on Meta's financial profile and detail how the company's aggressive spending bodes well for Nvidia (NASDAQ: NVDA).

A trip down memory lane

You may recall that a few years ago, a concept known as the metaverse swiftly emerged as the next big megatrend. If an executive referenced how their company planned to use the metaverse to transform operations, chances are investors plowed into the stock.

META SG&A Expense (Annual) data by YCharts; SG&A = selling, general, and administrative.

There may be no other company that went all-in on the metaverse more than Meta -- it even changed its name from Facebook to Meta Platforms.

Throughout 2022, Meta poured billions of dollars into its metaverse ambitions. The company's spending across selling, general, & administrative (SG&A) functions, as well as research and development, began accelerating sharply. As its operating expenses ballooned, Meta's free cash flow deteriorated -- causing investors to become wary of the company's direction.

These dynamics led investors to sour on the stock, because the company's investments in the metaverse were not bearing fruit. As sentiment increasingly turned negative, shares sold off by more than 60% by the end of 2022.

Image source: Getty Images.

Meta's latest obsession is artificial intelligence

While Meta still has some level of interest in the metaverse -- namely through wearable hardware devices and enhanced gaming platforms -- the company's primary focus turned to artificial intelligence (AI).

During Meta's third-quarter earnings call last week, CEO Mark Zuckerberg spent quite a bit of time detailing the company's AI road map -- from new products and services, to how these projects are making a direct impact on consumer engagement and sales.

META Capital Expenditures (TTM) data by YCharts; TTM = trailing 12 months.

As the graph above illustrates, Meta's capital expenditures (capex) are rising rapidly to fund these new initiatives. Much of this spending can go into one of two buckets: infrastructure and talent acquisition.

Earlier this year, Meta took a $14.3 billion stake in data-labeling start-up Scale AI. And the company has been on a relentless push to bolster its engineering and research head count. It has reportedly hired a number of high-level employees away from competing AI platforms, forming its own in-house operation, dubbed Meta Superintelligence Labs (MSL).

The company is also expanding its data center footprint by building a 5-gigawatt facility known as Hyperion in Louisiana.

Against that backdrop, investors learned that Meta's capex next year is expected to be "notably larger" compared to 2025 levels, according to the company's chief financial officer, Susan Li.

In my eyes, this comment was the spark behind the sell-off in Meta stock. Many investors are still bruised from the downturn in 2022 and remain mindful that history was not kind during Zuckerberg's first spending spree.

How does Meta's spending impact Nvidia?

Nvidia's largest customers include cloud hyperscalers like Microsoft, Alphabet, Amazon, and Oracle. Meanwhile, other large-scale AI developers such as Meta are also in front of the line to procure access to Nvidia's leading GPU architectures.

Meta's decision to double down on its capex budget is a clear signal that investment in AI infrastructure remains top-of-mind for Zuckerberg and the Superintelligence Labs organization. As long as hyperscalers are accelerating their capex, Nvidia should remain one of the largest winners of the AI infrastructure era -- underscored by prolonged periods of revenue generation supplemented by compounding profitability.

These dynamics indicate that Nvidia's competitive moat will remain durable as the company continues benefiting from powerful secular tailwinds of ongoing infrastructure spending.

All told, I see Nvidia continuing to operate from a position of strength, and I view the stock as a no-brainer opportunity to buy and hold for investors with a long-term time horizon.

Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.