Let’s cut to the chase: $400 is looking like a real possibility. Tariff tremors could hit Big Tech where it hurts and Meta (NASDAQ:META) isn’t exempt. At first glance, you might think, “Meta doesn’t sell hardware like Apple (NASDAQ:AAPL) or import tons of goods like Amazon (NASDAQ:AMZN) – how exposed could they be?” Well, let’s break it down – because the exposure is real, and the downside could be sharper than most investors are ready for. Also, with tech being hurt by tariff talk, see Amazon Stock To Crash To $120?
Risk exposure in a single stock, or a concentrated group, is always a concern. This is why we combine different sectors and groups of stocks in our High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
The China Exposure That You Might Have Not Guessed
Meta doesn’t ship iPhones or smart TVs, sure. But the backbone of its empire – servers, GPUs, networking hardware – is assembled in a supply chain with deep ties to China and Southeast Asia.
That means:
- Tariffs on Chinese components will imply higher costs for Meta’s data centers and infrastructure buildouts
- Those new AI training clusters? Heavily dependent on imported parts.
- And passing those costs on? How? Meta doesn’t charge users. It sells ads. So higher costs go straight to the bottom line.
- In addition, Chinese companies account for a large chunk of advertising on Meta. If they can’t sell products in the U.S., they have no reason to advertise on Meta!
Meta’s business model relies on scaling infrastructure to feed algorithms, power reels, and support its growing AI stack. That may get more expensive now and add to that potential pull back in advertising, and you have a concerning situation brewing.
Strong Fundamentals, But Market Confidence Is At A Low
Let’s talk numbers. Meta is no slouch:
- Revenue growth: 22% in last 12 months
- Operating margin: 42%
- P/E Ratio: 21x
That might look like a discount compared to Microsoft (31x) or Apple (32x), but here’s the rub. Markets function on confidence, and they are jittery right now. Any slip – even short-term margin pressure from tariffs – and sentiment could go bad fast. Remember, this is the same stock that went from $380 to $90 in 2022 when growth faltered and costs ballooned.
Flashback: Meta Doesn’t Dip, It Nosedives
Meta’s not a stock that gently sells off. It craters when things go south:
- 2018 Market Dip: -43%
- 2020 Covid Crash: -38%
- 2022 Inflation + CapEx Spiral: -76%
So if tariffs start to bite, margins compress, and AI costs get questioned again? Don’t be shocked if Meta retraces to $400 or below. That would still leave it up massively from 2022 lows but represent a > 20%+ haircut from today.
Here is another concern. Meta is going all-in on AI infrastructure, trying to build the next-generation recommendation engine, chatbot layer, and monetization engine for WhatsApp. But let’s be honest – so far, AI hasn’t really paid the bills. Investors have been patient, but if macro headwinds (like tariffs) start hitting the cost side and AI doesn’t start showing ROI soon, that patience could turn to panic.
Meta is another tech darling that has offered returns, but at the cost of great volatility. We combine different categories of stocks to lower the volatility while maintaining upside exposure in the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. 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.
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