Stocks looked leaden as the week ended, adding to the impression that the aging bull market is topping. The Dow tacked on a perfunctory 104 points, or 0.22%, and it wasn’t pretty. There was little life in the lunatic sector (aka ‘the Magnificent Seven’), which until recently could be relied on to celebrate its wildest flights of fantasy on Fridays. The biggest winner in the bunch was META, which rose 1.80% on news that Zuckerberg is having second thoughts about his all-in bet on a metaverse.
If you’re unfamiliar with the term, it refers to a virtual world in which users interact online through avatars. Zuckerberg evidently thought there were hundreds of millions of us, if not billions, eager to escape the pain and drudgery of day-to-day life. He was so certain about this that he changed the name of his company in 2021 from Facebook to Meta. But after sinking $70 billion into the concept, there has been precious little payback. Even more troubling to investors is that there are no obvious ways to make back what has been spent already, nor to recoup any further sums Meta might pour into the idea.
Counting on Investors’ Stupidity
To cover up this boo-boo, and to avoid being thought clueless, Zuckerberg did what any muckety-muck CEO in the digital world would have done: a twisting somersault onto the AI bandwagon. “AI is the most important technology we are working on,” he said, evidently hoping investors have forgotten that he spent the last four years taking pains to separate the supposed;y lucrative potential of metaverse from the vague and so-far profitless promises of AI. This latest statement to the press was a smart move if you believe that the $10 gain recorded by META on Friday was the beginning of a lasting rally. More likely is that it will be reversed on Monday or Tuesday, adding to the disillusionment that has been weighing on the broad averages for the last few months.
Meanwhile, Facebook is stuck with a moniker and a concept that are perceived as dead on arrival. Although Zuckerberg is known as a smooth talker, watching him try to extricate himself from this memic trap promises to be entertaining. Faced with a branding problem that is not merely tricky but potentially fatal, he doesn’t dare return to the name ‘Facebook’, since that would be admitting failure and the stupidity of his biggest-ever idea. But if he changes the company’s name a second time to some as-yet-unclaimed, nebulous variant of AI, he will look like a flake. My guess is that he will stick with Meta, forever associating himself with a virtual Edsel. Like Johnny Cash’s boy named Sue, Zuckerberg will have to work three times as hard to be taken seriously, particularly by his billionaire cohort who are already well aloft in their splendiferous AI hot-air balloons. [Click here for the rest of it in my latest conversation with Jim Goddard on This Week in Money.]
