In the midst of an unprecedented AI buildout, Meta is spending more than most. The company is building two massive data centers, and reporting indicates there will be as much as $600 billion in spending on U.S. infrastructure over the next three years.
Those figures might not raise eyebrows in Silicon Valley, but they’re starting to make Wall Street nervous.
The issue came to a head this week as Meta reported quarterly earnings, which showed the company’s operating expenses jumping $7 billion year-over-year and nearly $20 billion in capital expense. It was the result of intense spending on AI talent and infrastructure, which has yet to bring in meaningful revenue for the company. When analysts pressed for more specifics, Mark Zuckerberg made it clear the spending was just getting started.
“The right thing to do is to try to accelerate this to make sure that we have the compute that we need, both for the AI research and new things that we’re doing, and to try to get to a different state on our compute stance on the core business,” Zuckerberg told analysts on the call. “Our view is that when we get the new models that we’re building in MSL in there and get like truly frontier models with novel capabilities that you don’t have in other places, then I think that this is just a massive latent opportunity.”
If his goal was to reassure investors, it didn’t work. By the end of the call, Meta’s share price had plummeted in value. Two days later, the rout has only deepened. The Meta’s stock dropped 12% by the closing bell on Friday, representing more than $200 billion in lost market cap.
It’s dangerous to read too much into stock prices, and in strict financial terms, Meta’s quarterly earnings weren’t that bad. ($20 billion in quarterly profit is nothing to complain about.) But this was the first quarter in which Meta’s aggressive AI spending on both talent and infrastructure had a visible impact on the company’s bottom line. Even more alarming was that, aside from a lot of enormous data centers and well-compensated AI researchers, it wasn’t clear what the money actually bought.
Analysts pressed Zuckerberg on why he was spending so much on AI, and when they could expect to see revenue from the growing spending. But the call came at an odd spot in Meta’s planning, with no clear budget for projected spending and no available product that could anchor a revenue forecast. As a result, Zuckerberg was left with only general claims about the promise of AI.
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“There are going to be all kinds of new products around different content formats, and we’re starting to see that,” he asid during the call. “And then there are the business versions of all these too, like business A … the other part is how more intelligent models are just going to improve the core business and improve the recommendations that we make across the Family of Apps and improve the recommendations in advertising.”
Meta isn’t the only company spending billions of dollars on AI infrastructure, so it’s worth teasing out why this same spending isn’t spooking investors at Google or Nvidia, both of which had a great quarter. OpenAI is the biggest offender, spending the same amount with far less financial cushion than Meta.
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