Meta Platforms shares traded lower on Wednesday even as the broader US equity market advanced, as investors evaluated the competitive implications of OpenAI's newly introduced Dots AI agent for the company's rapidly expanding Muse platform.
The stock opened the session down nearly 2% before recovering most of that decline, ending the afternoon with a loss of 0.2%. The muted performance stood out against a rising market backdrop and followed a strong run for Meta shares, which had climbed more than 28% over the prior month on enthusiasm for Muse, a centerpiece of the company's consumer artificial intelligence strategy.
OpenAI's Dots targets premium users
OpenAI is launching Dots as an always-on AI agent application positioned to compete directly with Meta's Muse. While Meta shares initially rallied on Tuesday afternoon following OpenAI's presentation, sentiment reversed during Wednesday's session.
Investors had already been bracing for increased competition after Muse's viral debut earlier this month helped drive Meta shares more than 30% higher. However, Evercore ISI analyst Mark Mahaney noted that 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 subscribers of OpenAI's $100-per-month Pro plan and Business Premium plans, along with more expensive custom tiers such as Enterprise. OpenAI has said it intends to expand access to more users soon. By contrast, Muse offers free access to its core capabilities, with paid plans for heavier usage. The app provides more than 100 million weekly AI tokens, while power users can increase their allocation through $20- and $100-per-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.
This article is for informational purposes only and does not constitute financial advice.
