How Todd Gordon is trading Meta as the stock market rotates out of growth and into value names
(See the video above for Todd’s complete chart breakdown.) Recently in this weekly column, we’ve been tracking a significant rollover in technology and a rotation into more value-oriented sectors. Today, I’m pushing that theme further with Meta Platforms (META). In times of volatility and uncertainty, I lean heavily on the important combination of both our technical and fundamental work to see where we’ve been, where we are,and where we may be headed. Three charts tell the story. The first chart overlays Meta’s daily price on its ratio to the S & P 500 (SPY) . That ratio rises only when Meta outperforms. For years, the price and the ratio moved largely in step. That changed after Meta peaked in the fall of 2025. This autumn, the stock rallied back to that high and stalled, forming a double top, while the ratio made a significantly lower high. Even Meta’s recovery has lagged the market. Why? Investors are questioning the hyperscalers’ enormous AI spending and whether it will ever earn an adequate return. Meta’s Oct. 21 report looked solid on the surface, with record revenue of $64.6 billion, up 26% and ahead of expectations. The problem was spending. Capex ate more than half of revenue in the quarter, and Meta now expects 2026 capex of $135 billion to $145 billion, roughly double the $70 billion it spent in 2025. I can’t help but think back to Oct. 27, 2022, when our own Jim Cramer famously soured on Meta. He said he had trusted management to rein in spending before it consumed free cash flow. Annual capex was running around $31 billion then. Four years later, I wonder what Jim is thinking. And I don’t even want to tell you what analysts project for the next three years … I won’t hold you in suspense. That spending has pushed Meta’s free cash flow negative for the first time in more than a decade, and the stock is being punished for it. Days after earnings, Meta launched a $37.5 billion stock offering to help fund the build-out. Meta isn’t alone. Alphabet fell about 10% after hours on Oct. 28, even though Google Cloud revenue more than doubled. Earnings missed, partly due to a paper loss on its SpaceX stake, but the spending stole the show. Alphabet posted $51.4 billion of quarterly capex and a second straight quarter of negative free cash flow, and it said spending will climb again in 2027. So what are we doing about it? In the video, I walk through our proprietary position-tracking and position-sizing process and how it applies to Meta. We recently added to our position after the warm reception of Meta’s new Muse AI agent. But four years after Cramer’s mea culpa, the Street is again heavily questioning Meta’s spending, and we may need to reduce our holdings. Todd Gordon is the founder of Inside Edge Capital, LLC . DISCLOSURES: Gordon owns METApersonally and for clients of Inside Edge Capital, LLC. Charts shown are Koyfin. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
