Mark Zuckerberg's Net Worth Dropped $18 Billion in a Single Day as Meta Stock Extended a Losing Streak. Is the Sell-Off Overdone?

Things are going from bad to worse for Meta Platforms (NASDAQ: META). The company already wasn't having a good year, but its second-quarter results, released on July 29, raised even more concerns for many investors and sent shares down about 8% after its update, wiping $18 billion from CEO Mark Zuckerberg's (whose wealth is mostly due to his owning a large portion of the company) net worth. Meta's shares rebounded somewhat after the post-earnings drop, but they are still down 9% year to date. Has the sell-off gone too far?

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Is Zuckerberg right this time?

One reason investors are worried about Meta's future is that the company is spending heavily on its artificial intelligence (AI) projects. During the second quarter, these investments contributed to a 13% year-over-year decline in earnings per share to $6.18. Even worse, Meta's free cash flow plunged by 91% year over year to $784 million. Zuckerberg is unapologetically bullish on AI. But the last time he was that excited about one of the company's initiatives, things didn't turn out well. Several years ago, Meta Platforms started pouring small fortunes into its metaverse ambitions.

Zuckerberg had a grand vision of a shared digital world where millions of people could interact, potentially opening the door to billions of financial transactions that the company could support. However, Zuckerberg's master plan has failed, at least so far, and mostly ended up being a drag on earnings and margins. Many people fear that something similar may happen with the company's AI-related ambitions.

Reasons to be optimistic

Still, there are important differences between Meta Platforms' metaverse push and the company's AI-related efforts. For one, the company is already capitalizing on the technology, arguably way more than it ever profited from its work on the metaverse. Meta's AI-powered algorithms have helped boost engagement on its websites and apps, while the company is also helping advertisers improve their ad campaigns.

Further, Meta Platforms' family of large language models, Llama, is one of the notable names in the game. Meta AI, an AI assistant that is powered by Llama, has a billion monthly active users. Also, Meta is reportedly working to launch a cloud business and rent out excess AI computing capacity. According to Zuckerberg, the company has many offers along those lines.

It's worth noting that one thing Meta's failure on the metaverse taught us is that the company can pivot its strategy quickly. Once it became clear its metaverse efforts were going nowhere, Meta Platforms cut expenses and pursued other opportunities. The company's large user base -- it ended the second quarter with 3.60 billion daily active users across its websites and apps -- is a powerful competitive advantage, enabling it to continue seeking lucrative ways to monetize this ecosystem. My view is that Meta's sell-off is indeed overdone, and its shares look attractive at current levels. Investors should buy the dip.

Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.