Meta’s AI Ambitions: A Mixed Bag of Results
Beating Expectations, But Caution Ahead
Meta Platforms, the parent company of Facebook and Instagram, has reported a strong fourth-quarter revenue, surpassing Wall Street expectations. However, the company’s forecast for the current quarter has raised concerns about the effectiveness of its artificial intelligence (AI) investments.
Revenue and Expenses: A Delicate Balance
Meta’s revenue for the fourth quarter of 2024 stood at $48.4 billion, exceeding analysts’ estimates of $47.0 billion. However, the company expects revenue for the first quarter to be between $39.5 billion and $41.8 billion, which is lower than analysts’ average estimate of $41.72 billion. This has sparked concerns about Meta’s capital spending, which is heavily focused on AI infrastructure and “metaverse” technologies.
The AI Conundrum
Meta’s AI ambitions are a significant factor in its capital expenditure, with plans to invest up to $65 billion in 2025 to expand its AI infrastructure. The company’s total expenses for 2025 are expected to be in the range of $114 billion to $119 billion, up from $95 billion in 2024. This has raised questions about whether Mark Zuckerberg’s AI infrastructure bet will pay off.
The Impact of DeepSeek’s AI Models
The recent launch of Chinese company DeepSeek’s AI models has triggered a selloff in global tech stocks, with concerns about rising AI costs in the U.S. DeepSeek’s models have been shown to match or outperform top U.S. rivals at a fraction of the cost, challenging the prevailing view that scaling AI requires vast computing power and investment. Zuckerberg has expressed optimism about the potential benefits of open source AI, stating that “there’s going to be an open source standard globally.”
Meta’s AI Strategy
Meta’s AI teams are already integrating DeepSeek’s insights into their plans, with Zuckerberg noting that the company hopes to implement the Chinese company’s advances into its systems. The breakthrough could heighten scrutiny from investors worried about Meta’s heavy spending on AI, but it may also benefit the company if it successfully brings down the cost of building and supporting the models.
The Metaverse Conundrum
Meta’s metaverse-oriented Reality Labs unit continues to hemorrhage money, losing about $5 billion in the fourth quarter. Despite this, Zuckerberg believes that the business opportunity for Meta in AI lies beyond 2025.
A Focus on Custom Silicon
Meta aims to use its own custom-designed silicon chips to train its AI ranking and recommendations systems by next year. The company will continue to buy Nvidia’s AI chips while working on its internal designs, said Meta CFO Susan Li.
Job Cuts Ahead
Zuckerberg has warned employees about more job cuts this year to raise performance, with plans to lay off 5% of its “lowest performers.” This move is aimed at streamlining the company’s operations and focusing on its AI ambitions.
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