Stacy Boit,

Meta took the brunt of investor concerns on Wednesday over how the biggest US tech firms are spending massive sums on artificial intelligence (AI).

Shares in the company, which owns Facebook and Instagram, dropped 7% in extended trading, after saying it would spend billions more on AI projects than it had initially planned.

Meta, Google-owner Alphabet, Microsoft, and Amazon all reported their quarterly earnings at the same time. But the latter three companies fared better with investors as they showed how their own huge AI investments were starting to pay off.

Tech investors have become increasingly wary about the more than $650bn (£481bn) the four firms are spending this year alone on AI.

Lee Sustar, an analyst at Forrester, said there is still anxiety “about the sustainability of the AI boom” given the high cost and so far unrealised gains. Yet, tech companies are pushing forward with plans, for this year and next, to pour billions into its development.

“With the potential payoff of AI leadership seemingly so high, the companies continue to make those bets, forcing investors and customers alike to assess how their interests are impacted,” Sustar added.

Meta’s share price slumped after it said it needed to spend even more money to get the results it is wanting from AI.

The firm said its planned capital expenditure, the metric companies use to detail their spending on projects that have not yet turned into business growth, will increase to as much as $145bn, up from a previous maximum of $135bn.

Susan Li, Meta’s chief financial officer, said Meta has in past years “underestimated our compute needs” and that it needed to spend more money in order to meet them.

Asked how this spending would lead to results, Meta’s chief executive Mark Zuckerberg said: “I don’t think we have a very precise plan for exactly how each product is going to scale or anything like that.”

“But I think we have a sense of the shape of where these things should be… and I’m quite comfortable that the lab we’re building is on track to be a leading lab in the world,” he added, referring to Meta’s Superintelligence Lab.

Zuckerberg also mentioned AI’s impact on Meta’s own workplace and alluded to potential significant job cuts coming at the company.

“We are seeing more and more examples where one or two people are building something in a week that would have previously taken dozens of people months… We’re building the next evolution of our company around these people,” Zuckerberg said.

Asked about the possibility of more layoffs, Li said: “We don’t really know what the optimal size of the company will be in the future.”