Mark Zuckerberg's Costly Metaverse Gamble, AI Spending Spree Could Deal 'Lethal' Blow To Meta, Warns Lawrence McDonald

Lawrence McDonald warns that Meta Platforms Inc. may face severe financial consequences due to its heavy investments in the metaverse and AI. Meta's capital expenditure has surged from $1 billion in 2013 to a projected $69 billion by 2025, indicating a shift towards long-term infrastructure at the expense of short-term profitability. The company's Reality Labs reported $5 billion in losses last quarter, with VR developer salaries significantly higher than industry norms. Rising depreciation-to-capex ratios could further inflate earnings figures, raising concerns about financial sustainability.

Lawrence McDonald, founder of the Bear Traps Report, issued a stark warning on Monday about Meta Platforms Inc. META, writing on X: “Imagine (Zuck) losing billions on a metaverse bet, and then going all in AI capex? Testosterone can be lethal.”

McDonald Warns of ‘Testosterone’ Driven Spending

McDonald’s comment came in response to Speedwell Research data showing Meta’s depreciation-to-capex ratio increased to 3.8x from 2.2x, indicating potential earnings overstatement.

CapEx Intensity Reaches Critical Levels

Meta’s capital expenditure has skyrocketed from $1 billion (17% of revenue) in 2013 to a projected $69 billion (36% of revenue) in 2025E. The most dramatic acceleration occurred post-2022, with spending jumping from $14 billion to $54 billion in the last twelve months.

The company’s CapEx-to-revenue ratio surge suggests prioritizing long-term infrastructure over near-term profitability as Meta pursues “Super Intelligence” capabilities across its platforms.

Reality Labs Burns Cash Despite Premium Talent Costs

Meta continues hemorrhaging money on metaverse development, reporting $5 billion in Reality Labs operating losses last quarter. The company pays VR developers $600,000 to nearly $1 million annually—double typical gaming industry compensation, according to Andiamo CEO Patrick McAdams.

Average compensation for Meta’s VR developers reached $540,000, significantly exceeding Apple Inc. AAPL at $500,000 and Alphabet Inc. GOOGL GOOG at $440,000.

Mathematical Depreciation Concerns

Speedwell Research highlighted that rising depreciation-to-capex ratios “mathematically” guarantee continued depreciation increases, potentially inflating current earnings figures as infrastructure investments age.

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