Meta Platforms is facing a new challenge from OpenAI, the company behind the groundbreaking chatbot ChatGPT. OpenAI is now venturing into the short-form video space with its AI video generator, Sora 2, which uniquely blends artificial intelligence with social media engagement. This new app combines AI-powered video creation with a social feed that mirrors the user experience of TikTok and Instagram Reels.
Sora 2 experienced a rapid surge in popularity, securing over a million iOS downloads within five days of its September 30 launch, despite its invite-only access. This download rate surpassed that of the ChatGPT app upon its launch in May 2023, highlighting the initial excitement surrounding OpenAI’s entry into the video market. Sora 2 held the top spot on Apple’s App Store for three weeks, before being overtaken this week by Dave’s Hot Chicken China, following a promotional campaign with rapper Drake; it currently holds the second position as of Friday morning.
The central question is whether Sora 2 can sustain its initial momentum and pose a genuine threat to Meta’s dominance in the social media landscape. Meta’s core strength lies in the vast amount of time users spend on Facebook and Instagram, making these platforms essential destinations for advertisers. Meta’s advertising revenue is projected to reach $192 billion in 2025 alone.
“This isn’t the end of the Instagram-Facebook momentum,” Michael Nathanson, analyst at MoffettNathanson, told CNBC. “But if investors see this as a threat, it may limit how much they’re willing to pay towards the premium for Meta,” Nathanson added, who maintains a buy rating and $890 price target on Meta stock representing approximately 21% upside from Thursday’s close.
Since the day before Sora 2’s launch, Meta’s stock has experienced a decline of almost 1%, part of a broader downturn over several months. Conversely, the tech-heavy Nasdaq has gained more than 2% in the three weeks following Sora 2’s debut, and has advanced roughly 10% over the past three months.
Nathanson suggests that investor anxieties are mounting, and any perceived threat to Meta’s engagement flywheel – and the corresponding advertising revenue – could quickly erode investor confidence. While bullish on Meta shares, Nathanson acknowledges the need to remain open to shifts in consumer behavior. “Investors start to worry about the long-term sustainability of business models,” Nathanson added. “And if you see a potential new competitor emerging, then people would pay a lower multiple for future earnings.”
The tech industry has witnessed similar scenarios before. The rapid growth of ChatGPT in late 2022 weighed on shares of Alphabet, Google’s parent company, as investors questioned the long-term viability of Google’s search dominance in the face of a sophisticated conversational AI competitor.
Now, Meta could be experiencing its own “ChatGPT moment.” Or will Sora 2 become a short-lived phenomenon that fails to disrupt Meta’s social media empire? Sora 2 allows users to generate, remix, and integrate themselves into AI-generated videos using text prompts or images. Beyond video generation, it incorporates a social component, allowing users to discover videos in a personalized Sora feed and share them across other social networks.
Sora 2 builds upon the capabilities of the original Sora model, introduced in February 2024, by offering more accurate and realistic video generation. However, OpenAI’s rise hasn’t been without its complications. Recently, the company temporarily suspended the creation of AI-generated videos depicting Martin Luther King Jr. after users produced “disrespectful depictions.” OpenAI has stated that it is strengthening its safeguards for public figures and will allow individuals and their families to opt out of appearing in Sora-generated content.
Furthermore, OpenAI isn’t the only player in the AI video space. Google has developed Veo, an updated version of which recently launched. Prior to Sora 2’s release, Meta introduced Vibes, a new feed within the Meta AI app that allows users to create and share short-form AI-generated videos. Vibes offers users AI-generated videos that evolve over time to become more personalized. Users can create videos from scratch, leverage existing content, or remix videos from the feed. These videos can be shared directly on the Vibes feed, sent as direct messages, or cross-posted to Instagram and Facebook Stories and Reels.
Similarweb, a market intelligence provider, reports that as of October 17, daily active users across both iOS and Android for the Meta AI app have reached 2.7 million, up from approximately 775,000 four weeks prior. This growth is linked to the incorporation of Vibes into the Meta AI app.
While Meta’s Vibes could serve as a response to Sora 2, it is “still technically behind Sora,” according to Nathanson in an October 13 note to clients. Unlike Sora, which seamlessly blends real and AI-generated footage based on OpenAI’s proprietary models, Vibes relies on third-party tools and creates fully synthetic content.
Meta has reportedly been on a hiring spree of top AI talent since this summer to close the gap with OpenAI. Although Meta is now laying off 600 people in its AI division, earlier reports indicate that high-profile AI talent acquisitions were unaffected. Meta is also investing heavily in data center projects with the aim of expanding its AI computing infrastructure.
BMO Capital Markets analyst Brian Pitz emphasizes Meta’s scale and adaptability in mitigating potential disruption from Sora 2. “If one area of growth starts slowing, they can step on the gas in another,” he said, citing apps like WhatsApp and Threads as examples of platforms that haven’t yet achieved significant monetization. Meta introduced ads on both platforms this year.
Pitz highlighted Meta’s history of successful innovations, such as the launch of Stories to compete with Snapchat and Reels in response to TikTok, as evidence of the company’s ability to adapt to competitors and maintain user engagement. Meta’s “competitive moat” lies in its massive base of over 3 billion daily active users, which far exceeds OpenAI’s reach for both Sora 2 and its flagship product, ChatGPT, with 800 million weekly active users. Pitz, who has a hold-equivalent rating and $710 price target on Meta stock, believes that “a little bit of new monetization goes a really long way on that big of a user base.”
A more fundamental question surrounding Sora 2 and Meta’s Vibes is whether consumers truly desire fully AI-generated content on social media. Pitz cautions that the hype surrounding Sora’s growth may ultimately fade. Concerns include user fatigue with synthetic feeds and potential platform abandonment over copyright issues and AI “slop” content. “You risk ending up with a pool of craziness,” Pitz said.
Deutsche Bank analysts also suggest that the initial Sora 2 excitement may be waning. “While a plausible [competitive] concern, our data checks point to retention softness at Sora,” analysts wrote in a note on Tuesday. “In fact, by day 7, we find that ~98% of initial users no longer open the app. As such, in our view, the app still lacks the scale and retention levels to be a meaningful new competitor to Instagram/Facebook engagement.”
These findings, for now, come as welcome news for Meta investors.
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