Is Meta Platforms Stock Built to Withstand More Downside?

META Platforms stock (NASDAQ: META) has dropped 18.4% in just 21 trading days. This sharp decline reflects renewed concerns among investors regarding the company’s aggressive spending on both AI infrastructure and its Reality Labs division.

The core question prompted by such a severe drop is whether this weakness is a temporary setback or a sign of deeper cracks in the company’s long-term narrative, particularly amid broader anxiety over an “AI bubble.”

We’ll delve into this in the sections below. That being said, if you seek an upside with less volatility than holding an individual stock like META, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell 2000, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Image by Alexandra_Koch from Pixabay

Before judging its downturn resilience, let’s look at where Meta Platforms stands today.

• Size: Meta Platforms is a $1.5 Tril company with $189 Bil in revenue, currently trading at $597.69.
• Fundamentals: Last 12-month revenue growth of 21.3% and operating margin of 43.2%.
• Liquidity: Has a Debt to Equity ratio of 0.03 and a Cash to Assets ratio of 0.15
• Valuation: Meta Platforms stock is currently trading at P/E multiple of 25.7 and P/EBIT multiple of 17.7
• Has returned (median) 74.5% within a year following sharp dips since 2010. See META Dip Buy Analysis.

These metrics point to a Very Strong operational performance, alongside High valuation – making the stock Fairly Priced. For details, see Buy or Sell META Stock

The Double-Edged Sword of AI Investment

Meta has positioned itself as one of the most aggressive spenders in the AI race, with commitments for U.S. data centers and AI initiatives approaching $600 billion over the next few years—a pace that significantly outstrips many of its peers.

• The Bull Case (The Edge): CEO Mark Zuckerberg views this AI spending as transformative and necessary, underpinning future product innovation, online experiences, and business value. He has repeatedly stated that he prefers the risk of over-investing to the risk of being late to what he considers “the most important technology in history.”
• The Bear Case (The Risk): The unprecedented scale and pace of these outlays are fueling fears that Meta may be caught in an AI bubble. Critics highlight the potentially long timelines before these massive AI investments can translate into meaningful financial returns, especially given intense competition and the challenges of optimizing new AI products.

Core Business Headwinds and ROI Uncertainty

The risk is amplified by a slowing in Meta’s core business growth, particularly ad revenue, which serves as the primary cash engine funding the AI and Reality Labs spending.

This slowdown raises critical investor concern: Can Meta sustain this spending pace without significantly harming current profitability or being forced to take on excessive debt?

Although Meta’s liquidity remains strong, its approach to AI adds further uncertainty. Unlike Amazon, whose massive cloud infrastructure (AWS) is readily monetizable across enterprises, Meta’s AI efforts are primarily focused on product development. This product-centric approach makes the near-term Return on Investment (ROI) inherently more difficult to forecast.

That brings us to the key consideration for investors worried about this fall: how resilient is META stock if markets turn south? This is where our downturn resilience framework comes in. Suppose META stock falls another 20-30% to $418 – can investors comfortably hold on? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns, based on (a) how much the stock fell and (b) how quickly it recovered. Below, we dive deeper into each such downturn.

2022 Inflation Shock

• META stock fell 76.7% from a high of $382.18 on 7 September 2021 to $88.91 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 19 January 2024
• Since then, the stock increased to a high of $790.00 on 12 August 2025, and currently trades at $597.69

META Stock Performance During The 2022 Inflation Shock

 2020 COVID-19 Pandemic

• META stock fell 34.6% from a high of $223.23 on 29 January 2020 to $146.01 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 20 May 2020

META Stock Performance During The 2020 COVID-19 Pandemic

2018 Correction

• META stock fell 43.0% from a high of $217.50 on 25 July 2018 to $124.06 on 24 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 9 January 2020

META Stock Performance During The 2018 Correction

Feeling jittery about META stock? Consider a portfolio approach.

A Multi-Asset Portfolio Beats Picking Stocks Alone

Individual picks are volatile, but diversified assets offset each other. A multi-asset portfolio helps you stay the course, capture upside, and reduce downside.

The asset allocation framework of Trefis’ Boston-based wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’s strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices.

Also, you can consider the Trefis Reinforced Value (RV) Portfolio, which has also outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates