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Meta Platforms 10% Layoff Raises a Bigger Question About AI Spending

Written by Leo Miller

Shares of Meta Platforms (NASDAQ: META) have faced a notable degree of volatility in 2026. The stock started off the year hot, being up around 12% near the end of January. The company’s impressive Q4 2025 earnings reportdrove an over 10% single day gain.

However, a convergence of pressures then hit the stock. This included artificial intelligence (AI) spending fears, legal losses, and the U.S.-Iran conflict that drove down the market as a whole. Near the end of March, Meta was down 20% on the year.

The stock has recovered considerably since that point, now down less than 10% in 2026. Meta’s return has hovered near this level since the end of April, after shares took a 8.6% hit following its Q1 2026 earnings report.

Meta is making moves to fight against the biggest headwind to its performance: increasing AI capital expenditure (CapEx) forecasts. The firm is undertaking some of its largest layoffs in recent memory, aimed at offsetting AI investment. However, markets don’t appear to be buying the story.

Meta Initiates 10% Layoff—But for Much Different Reasons Than in the Past

In mid-May, reports emerged that Meta is laying off 8,000 employees. These job reductions account for approximately 10% of Meta’s total employee base. 

The move marks the company’s most significant workforce shake-up since its “Year of Efficiency,” which took place between 2022 and 2023. This initiative cut 21,000 jobs.

However, there are significant differences between these recent cuts and the Year of Efficiency reductions. 

Somewhat counterintuitively, Meta undertook one of its most aggressive hiring sprees ever from 2020 to 2022, during the height of the COVID pandemic.

By the end of 2022, Meta’s employee count had nearly doubled from the end of 2019, rising from around 45,000 to over 86,000. This came as COVID lockdowns pushed people to spend much more time on the internet and flock to e-commerce purchasing. This led to Meta’s sales growth soaring 37% year-over-year (YOY) in 2021.

The company loaded up on employees, believing that this was the beginning of a long-term tailwind for its business. However, as Meta admitted, this proved not to be the case, with sales dropping 1% YOY in 2022. In 2023, Meta dropped its employee count by 22% to around 67,000 in response.

Meta’s pasts cuts were a product of weaker-than-expected demand. That is not the case at all today.

Meta just posted its highest revenue growth in years at 33% YOY. Thus, demand is very strong, but it is being met with greater investments in technology rather than employees. In this sense, the move is much less a sign of weakness compared to mass layoffs in the past.

Layoffs Are Unlikely to Win Over Investors’ Hearts

Still, Meta shares haven’t really moved since recent layoffs began. This comes as investors likely don’t believe the cuts will have a huge impact on its financials.

Notably, analysts at Morgan Stanley have estimated that a 20% workforce reduction would generate annual savings of between $3 billion and $7 billion. At 10%, it’s fair to say that this forecast would move down to $1.5 billion to $3.5 billion.

Meta will also likely incur a significant charge to pay for severance packages. When it cut 10,000 employees in March 2023, its expected pre-tax severance charge and other personnel costs were $1 billion, which equates to $100,000 per employee. Holding this per-employee metric steady, the company may incur around $800 million in charges from the latest layoff, reducing the net near-term benefit.

Overall, Meta’s savings would be a drop in the bucket compared to the midpoint of its 2026 CapEx guidance of $135 billion. Furthermore, it’s unclear whether Meta will simply take whatever it saves from layoffs and allocate this to more AI investment, or if its CapEx guide will hold steady.

Either way, compared to its massive CapEx spending, the potential benefit of the layoffs is not much of a needle mover. This is likely one of the reasons shares have not benefited. Additionally, CEO Mark Zuckerberg told employeesthat he “does not expect more company-wide layoffs this year.”

This pushes back on past reports that the company would lay off 20% of its workforce in 2026. Investors may have viewed this as a disappointment, with actual cuts being much smaller.

Growth Is the Key to Meta’s AI Journey

In aggregate, this data shows that Meta will not be able to justify its AI spending through layoffs alone. Rather, the company will need to grow its revenues, and eventually free cash flow, to do so.

In this context, the fact that Meta is also reassigning 7,000 employees to AI-related roles may be more impactful than the layoffs. After the layoffs, Meta’s employee count will fall to around 71,000. Thus, the firm will reallocate around 10% of its remaining workforce to AI-related roles. This increased focus on AI could allow the firm to better utilize its investments and drive growth. READ THIS STORY ONLINE

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Almost 80,000 tech jobs vanished in the first three months of 2026. Meta cut 14,000 roles, Microsoft offered separation packages to 8,500 workers, and Oracle is reportedly eliminating up to 30,000 positions. Goldman Sachs estimates 12,400 Americans are being financially displaced every single day.

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As Small-Cap Outperformance Continues, These 2 ETFs Provide Exposure

Written by Jessica Mitacek

The eye-catching performance of some of the world’s largest stocks has led to them becoming fixtures in investors’ portfolios. Whether that exposure comes via market-cap-weighted funds or direct ownership, the stocks’ collective gains have overshadowed the roughly 2,500 other U.S.-listed stocks that do not meet the criteria for inclusion in the S&P 500.

But this year, a dramatic and structural shift in the markets has favored smaller, more nimble firms whose stocks have generated gains that have markedly outpaced their larger peers.

How Small-Cap Stocks Have Managed to Outperform This Year

Small caps generally have market capitalizations that fall between $250 million and $2 billion. For context, NVIDIA (NASDAQ: NVDA)—the largest publicly traded company on the planet—currently sports a market cap of around $5.41 trillion.

But after years of double-digit gains for the S&P 500, 2026 has been an underdog story for companies that don’t qualify for that index.

That has put a spotlight on small-cap companies, which are commonly tracked through the Russell 2000 Index. The index represents the smallest 2,000 companies in the broader Russell 3000, a market-cap-weighted benchmark designed to measure the performance of the U.S. equity market. So far this year, the Russell 2000’s constituents have contributed to a gain of more than 13%. Meanwhile, the S&P 500’s year-to-date (YTD) gain stands at just over 8%.

One reason why small caps have outperformed the S&P 500 so far in 2026 is that investors began the year by rotating out of Big Tech names. Massive outflows were fueled by fears of a weakening macro environment, runaway valuations, and concentration risks. Those stocks—including some members of the Magnificent Seven—have performed better of late. Nonetheless, those factors remain relevant, as do others that have served as tailwinds for small-cap stocks.

A valuation gap between smaller companies trading at massively discounted prices compared to their S&P 500 counterparts has been a catalyst. That spread sparked a wave of buying as institutional investors looked to use proceeds from tech’s runup in prices and reallocate to underpriced value and growth options in the Russell 2000.

Another major reason why small caps have bested the large- and mega-capmarket is that smaller companies are often insulated from the very geopolitical risks and tariff policy fallout that has inflicted uncertainty on the major indices.

U.S.-domiciled small caps tend to conduct much of their business domestically. That has served as a safeguard against the global supply chain disruptions that have plagued multinational companies that are far more sensitive to international trade policies.

For investors looking to add small-cap exposure while hedging against the S&P 500’s relative underperformance, the following two exchange-traded funds (ETFs) have delivered strong year-to-date track records and still have several tailwinds at their backs.

The Largest Small-Cap ETF Zeroes in on Growth

With nearly $100 billion in assets under management (AUM), the iShares Core S&P Small-Cap ETF (NYSEARCA: IJR)—formerly the iShares S&P SmallCap 600 Index Fund—is the world’s largest small-cap fund.

The ETF has a focus on growth stocks and holds around 650 companies, with a slant towards financials, which make up nearly 22% of the fund by sector exposure. Consumer discretionary, industrials, and tech together account for around 43%, while healthcare rounds out the top five sectors by weight, with an allocation of more than 10%.

The IJR has performed particularly well this year, which can be in part attributed to its more than 10% industry exposure between both semiconductors and semiconductor equipment, and oil, gas, and consumable fuel. So far this year, the ETF has gained around 13%.

After institutional selling outpaced buying in Q4 2025, the fund has seen a reversal in early 2026. During Q1, inflows of $849 million surpassed outflows of just $285 million. Alongside institutional ownership of nearly 67% and current short interest of just 0.96% of the float, the smart money is indicating that it’s bullish on the iShares Core S&P Small-Cap ETF heading into the second half of the year.

This Vanguard Fund Holds a Massive Portfolio of Small Caps

Launched in January 2004, the Vanguard Small-Cap ETF (NYSEARCA: VB) tracks the CRSP U.S. Small Cap Index, which includes the bottom 2% to 15% of the investable universe.

With nearly $75 billion in AUM, it is competitive with the IJR in valuation.

And while the ETF’s YTD gain of around 10% isn’t quite as impressive as the IJR’s, it is enough to have outperformed the S&P 500 this year.

Where the VB stands out is its sheer broad-based exposure. With 1,315 holdings, more than 18% of the fund’s portfolio is allocated to industrials, nearly 17% to financials, and 15% to tech. Consumer discretionary and healthcare round out the top five sectors at 11.2% and 10.6%, respectively.

Despite its focus on small-caps, it carries some big-time names. Coherent (NYSE: COHR), for example, is an industry leader in laser manufacturing and photonics-based solutions. The stock, which plays a critical role in AI infrastructure, has generated a YTD gain of more than 84%.

The Vanguard Small-Cap ETF has seen aggressive institutional buying over the past year, with inflows of more than $28 billion easily surpassing outflows of less than $5 billion. The bulk of that buying came in Q4 2025, when $24 billion was injected into the fund against sales totaling just $1.3 billion. Current short interest is negligible at just 0.16% of the float. READ THIS STORY ONLINE

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Silicon Shake-Up: The AI Trade Is Moving Beyond NVIDIA

Written by Jeffrey Neal Johnson

The first wave of the artificial intelligence (AI) boom created unprecedented wealth, catapulting a select few mega-cap tech stocks into the stratosphere. Now, the second act is beginning.

Institutional capital, wary of valuations priced for perfection, is executing a structural rotation. It is bypassing the saturated high-flyers and flowing into foundational semiconductor sectorequities positioned to capture an expanding $132 billion data center compute market.

This strategic shift is no longer a forecast; it is happening now, with recent market action providing clear evidence. Aggressive M&A activity and imminent hyperscaler deployment contracts are permanently re-rating the sector’s margin profile as the AI halo effect finally moves down the supply chain to legacy silicon providers with the scale to execute.

Awakening the Giants: Trading Volume Confirms the Rotation

The most telling indicator of a major market rotation is not analyst commentary, but the flow of capital itself.

Exceptional trading volume often precedes a structural re-rating of an asset, and the semiconductor sector is providing a textbook example.

The clearest evidence comes from Intel Corporation (NASDAQ: INTC), which recently saw its shares trade on a healthy intraday volume of 137.66 million, a stark deviation from its average.

This surge is not an isolated event but the culmination of accumulated interest that has propelled the stock to a remarkable year-to-date performance of more than 220%.

Such a large volume does not come from retail traders alone; it signals that large institutional funds are actively deploying capital, building significant positions in a name they believe is at an inflection point. 

This activity confirms the thesis that a deliberate and large-scale rotation is underway, targeting undervalued legacy players with the capacity to meet surging AI demand.

A Multi-Billion Dollar Bet on Next-Generation Architecture

With the AI landscape evolving at a breakneck pace, established semiconductor manufacturers are using their balance sheets to acquire the next-generation technology needed to compete. This M&A pipeline is a core catalyst driving the sector’s re-rating. Intel Corporation is again at the center of this trend, with reports of advanced discussions to acquire Tenstorrent for as much as $5 billion.

This is far more than a simple bolt-on acquisition; it represents a strategic masterstroke to gain a foothold in the critical RISC-V architecture. Acquiring Tenstorrent’s AI accelerator technology and open-source software stack would give Intel Corporation an immediate, credible path to challenge current data center monopolies.

The Street understands the significance of this potential move, with Melius Research issuing a $150 price target, anticipating immediate margin accretion as Intel Corporation pivots toward these higher-growth opportunities. This aggressive M&A posture is a clear signal that legacy silicon is not content to be left behind; it is actively buying its way into the AI halo effect.

How Legacy Silicon Is Capturing Critical Market Share

Speculation can only drive a stock so far; eventually, a company must deliver tangible business wins to justify its valuation. The rotation into legacy silicon is now being validated by precisely these kinds of wins, as hyperscalers and AI labs diversify their supply chains.

Advanced Micro Devices (NASDAQ: AMD) exemplifies this phase of the thesis.

AMD has reportedly secured a significant capacity allocation for its upcoming MI450 accelerator to power a new deployment for AI leader Anthropic.

This monumental victory provides concrete evidence that Advanced Micro Devices is successfully capturing market share from incumbents in the lucrative AI accelerator space—and is a key reason why analysts now project the data center TAM will exceed $120 billion by 2030.

The market’s conviction is reflected in AMD’s options chain, where a 30-day put/call ratio of 0.98 signals strong bullish sentiment and limited hedging.

It is also validated by Wall Street, where Citi recently raised its price target on Advanced Micro Devices to $460, citing the Anthropic deal. These contracts are the ultimate litmus test, proving that these companies have the technology to compete and win in the AI era.

Positioning for Profit: How to Approach the Semiconductor Rotation

The evidence points toward a multi-year infrastructure build-out that provides a powerful tailwind for the entire semiconductor ecosystem. The bull case rests on a $132 billion capital expenditure cycle redirecting toward these foundational providers.

However, this rotation is not without risk. The forward multiples on these stocks reflect high expectations, leaving little room for error.

The primary risk for Intel and Advanced Micro Devices is execution; any delays in product roadmaps or manufacturing issues could lead to significant margin compression. Competition remains intense, and the geopolitical landscape surrounding semiconductor manufacturing adds another layer of complexity.

For investors, this environment demands a clear strategy. The AI trade is undeniably broadening, and the data suggests the rotation into legacy silicon is well underway. Investors with a higher risk tolerance might consider the powerful volume and strategic catalysts as confirmation that the market is finally rewarding these manufacturing giants. More cautious investors may prefer to watch for a market-wide pullback to offer a more attractive entry point, while waiting for the next round of earnings reports to confirm that margin expansion is not just a forecast, but a reality. READ THIS STORY ONLINE

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