Meta's stock declined 9% during the week following the company's earnings report, with concerns about massive AI infrastructure spending erasing $135 billion from its market capitalization in just four trading sessions [1]. Despite reporting stellar earnings, the mega-cap technology company—valued at $1.65 trillion—faced investor anxiety over the scale and cost of its artificial intelligence buildout [1]. The selloff has created what some market participants view as a potential buying opportunity, with options strategist Mike Khouw identifying a specific trade strategy for investors seeking exposure to the stock's recovery potential [1].
Meta's AI opportunity centers on Muse, a personal AI agent designed as an active digital assistant capable of opening browsers, filling out forms, sending emails, scheduling appointments, booking travel, and potentially making purchases [1]. Revenue potential analysis suggests significant upside: if Muse generates $120 annually per user and reaches just 1% of Meta's 3.6 billion daily active users across Facebook, Instagram, WhatsApp, and Messenger, it could generate $4.3 billion yearly; alternatively, at half that value but reaching 20% of daily actives, it could produce $43.2 billion annually [1]. If Muse achieves $30 billion in revenues, it would constitute a megacap company in its own right [1].
Despite the underlying AI opportunity, Meta faces multiple headwinds pressuring its valuation [1]. These include a $25 billion lawsuit in New Mexico, public relations concerns related to a deal between the company and its founder regarding potential tax liabilities and voting rights preservation, concerns about debt financing the AI investment, and general market jitters about the AI sector [1]. At current valuations of 20x forward earnings and less than 17x FY2027 estimated earnings, the market is pricing in significant concerns [1]. In response to the weakness, Khouw recommends a December strangle strategy—specifically selling the 580/745 strangle—which would collect approximately $21.30 per share, positioning profits across a wide range between the stock's 1-year highs and lows [1].
CONCLUSION
Meta's 9% weekly decline reflects investor concerns about the company's substantial AI infrastructure spending despite strong earnings, with the $135 billion market cap loss creating what some strategists view as a buying opportunity [1]. The company's Muse AI agent presents significant long-term revenue potential that could justify current valuations, though near-term headwinds including litigation and debt concerns continue to pressure the stock [1]. Options strategists are positioning for recovery through income-generating strategies that profit across a wide valuation range [1].