Meta Platforms META shares were under pressure on Wednesday even as broader US markets moved higher, as investors weighed the potential threat from OpenAI’s newly launched Dots AI agent to the social media giant’s fast-growing Muse platform.
The stock started the session down by almost 2%, but picked up later in the day, and was down 0.2% in afternoon trading.
The stock has gained more than 28% over the past month, helped by enthusiasm around Muse, which has emerged as a key part of Meta’s consumer artificial intelligence strategy.
But the launch of Dots has prompted investors to reassess whether Meta can maintain its early lead in the increasingly competitive AI agent market.
At the same time, StoneX analyst Mark Zgutowicz warned that Meta’s muse could actually intensify concerns over the company’s enormous AI infrastructure spending rather than alleviate them, adding to investors’ worries.
OpenAI’s Dots targets premium users
OpenAI is rolling out Dots as an “always-on” AI agent app designed to compete with Meta’s Muse.
While Meta shares initially rallied on Tuesday afternoon following OpenAI’s presentation, the stock reversed course in Wednesday trading.
Investors had already anticipated greater competition for Muse after its viral launch earlier this month helped propel Meta shares more than 30% higher.
However, Evercore ISI analyst Mark Mahaney said Dots currently has a more limited distribution model than Muse.
“Importantly, unlike Meta’s Muse, Dots is not launching as a broadly available consumer product, as access is initially concentrated in premium professional and business plans,” Mahaney told clients late Tuesday.
“For now, we see Meta with Muse as the clear leader in the personal AI agent space.”
Dots is initially available to users of OpenAI’s $100-a-month Pro plan and Business Premium plans, alongside more expensive custom tiers such as Enterprise. OpenAI has said it intends to “expand to more users soon.”
By comparison, Muse offers users free access to its core capabilities, with paid plans available for heavier usage.
The app provides more than 100 million weekly AI tokens, while power users can increase their allocation through $20- and $100-a-month subscription options.
Distribution gives Meta an early advantage
Mahaney said the difference in access could play an important role in determining how quickly the two products gain users.
“We think that accessibility and massive distribution will continue to give Meta an early advantage in consumer adoption, while OpenAI’s existing relationships with businesses and professional users could help Dots gain traction in more complex and economically valuable work,” he added.
Meta is also expanding Muse beyond individual consumers.
The company unveiled Muse for Small Business on Tuesday, allowing its AI agent to connect with software from Asana, Zoom, Intuit, Box, Canva and Salesforce’s Slack.
The tool can also connect with Meta advertising accounts and professional Instagram and Facebook profiles.
Pricing remains aligned with the existing Muse offering, which is free within usage limits and available through subscriptions for higher usage.
AI spending remains a concern
Despite the enthusiasm around Muse, StoneX analyst Mark Zgutowicz warned that the product could intensify concerns over Meta’s enormous AI infrastructure spending rather than alleviate them.
Zgutowicz, who has a Hold rating on Meta, said Muse’s infrastructure requirements could put further pressure on the company’s returns.
“We…see Muse’s materially higher infrastructure-intensity adding to, not relieving pressure from, Meta’s existing ROIC debate,” he said.
Meta expects to roughly double capital expenditures to about $140 billion this year as it invests heavily to compete with other Big Tech companies in AI.
The scale of the spending has raised questions among investors over whether the investments will generate sufficient returns.
Analysts have raised Meta price targets
The launch of Muse has nevertheless prompted a wave of bullish analyst actions.
JPMorgan analysts led by Doug Anmuth raised their Meta price target to $920 from $820 earlier this month, saying Muse could become “the most widely used consumer AI application since ChatGPT.”
Citizens raised its target to $885 from $770, while KeyBanc analyst Justin Patterson lifted his target to $900 from $780.
Cantor Fitzgerald also raised its target to $860 from $680.
The series of target increases has strengthened investor expectations that Meta’s AI investments could eventually create new monetization opportunities, although the emergence of Dots highlights the competitive pressure facing the company as it expands further into AI.
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