The interest in all things artificial intelligence (AI) in the stock market went back into overdrive in August. Unfortunately, Meta Platforms (NASDAQ: META) failed to join the party. The company, led by founder Mark Zuckerberg, is investing heavily in AI but is not being rewarded by the market, and adoption has failed to materialize across most of its software services.
This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia.
Continue » Now, Zuckerberg and the team are considering selling some of Meta's compute power in a new AI cloud business. Does that make the stock, now trading below $600, a buy? Last quarter, Meta spent $30 billion on capital expenditures, nearly doubling its capex year over year.
For the full year, Meta expects to spend $130 billion to $145 billion on capital expenditures, mainly related to artificial intelligence. Some of this will be used to advance its advertising platform, but the majority will go toward frontier research and inference capacity for AI models. Right now, Meta's AI models do not see much external use, so it is already building up excess capacity in data centers that is not being utilized.
Zuckerberg said that other AI companies have reached out to Meta Platforms to buy access to its compute capacity at a premium over the purchase price, although the exact financial details of the arrangement are unclear. However, if we compare it to recent deals signed by Space Exploration Technologies that are set to generate tens of billions in annual revenue, Meta could quickly grow this AI cloud business if it wants to turn on the spigot. The risk arises because Meta is already struggling to identify internal use cases for its AI infrastructure.
It could sell these services to third parties today in a similar move to SpaceX, CoreWeave, or Nebius Group, but eventually, the AI software providers are going to stick with the best-in-class hyperscalers like Amazon Web Services that can provide a comprehensive cloud service above just reselling compute, such as databases and other software. Meta is years away from doing this, if it even wants to. What all this means is that if Meta is already thinking of selling excess compute capacity to third parties, it is a bearish signal for the company.
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