Why Meta Platforms Stock Was Wilting on Wednesday

Key Points

• A top AI developer just unveiled its new-generation video generation tool.

• It's sure to get traction given the popularity of that developer's core app.

• 10 stocks we like better than Meta Platforms ›

There is only so much attention a person can devote to social media sites. So, for investors in such companies it can be worrying when another digital attention-grabber appears on the scene. Particularly when it's competitive in a technology their investments might like to harness for their own gain.

Such a dynamic was affecting Facebook, Instagram, and WhatsApp owner Meta Platforms (NASDAQ: META) on Wednesday. In late-session trading the bellwether social media stock was down more than 2% in price, contrasting unfavorably with the S&P 500 index's 0.4% rise.

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Competition for attention

Late Tuesday afternoon OpenAI, the privately held developer of leading artificial intelligence (AI) app ChatGPT, announced the release of its latest AI video generation model. This is Sora 2, which as the name implies is the next generation of its original Sora app.

Image source: Getty Images.

OpenAI isn't shy to hype its new offering. In its official announcement on the release, the company said of Sora 2 that it "can do things that are exceptionally difficult -- and in some instances outright impossible -- for prior video generation models."

ChatGPT is already a popular destination for people online; according to data compiled by Semrush.com, its site had nearly 5.4 billion visits in August. Many of those visits are in the form of text interactions with the system, although Sora is also used by those wanting to create videos. If Sora 2 is as powerful as advertised, it could make ChatGPT even more of an attraction.

Real ambitions for artificial intelligence

That might put a dent in Meta's soaring AI ambitions. CEO Mark Zuckerberg recently spoke of the company's hope to develop "AI Superintelligence," among other offerings utilizing the technology. In order to realize these goals, the company is spending billions of dollars on equipment and infrastructure to build out proprietary AI functionalities.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.