Brace for turbulence, and have patience. That was Mark Zuckerberg’s message to Meta shareholders on Wednesday as he explained his decision to plow tens of billions of dollars into a multiyear AI spending spree that will precede any meaningful payoff.
The cofounder and CEO of Meta, which owns Instagram, Facebook, and WhatsApp, said that he’d recently become more optimistic about the company’s prospects to dominate the highly competitive market for generative AI services, and that he’d concluded that “it makes sense to go for it.”
That may not sit well with investors, Zuckerberg acknowledged during the company’s first-quarter earnings call—and shares of Meta were down by more than 15% after hours as he spoke. “We’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing and scaling a new product but aren’t yet monetizing it.”
Meta said Wednesday that the capital expenditures to power its AI ambitions could total $40 billion this year, up to $5 billion more than it earmarked in October. And costs will only go up in the years to come, the company said, with Zuckerberg noting, “This is likely going to take several years.”
But Zuckerberg also made a point to note that “smart investors” will recognize the opportunity at hand and be patient. After all, the company has been through this before, he said, pointing to investments in products like Reels and Stories that have since paid off.
The direct appeal to Wall Street for patience underscores the risk of the AI arms race that Meta is committing itself to. Microsoft reportedly plans to spend up to $100 billion to build a specialized AI datacenter with ChatGPT maker OpenAI. And Google owner Alphabet has been investing heavily in AI for years.
While Google and Microsoft both have cloud businesses that serve as vehicles to monetize their AI investments, Meta is not in the cloud business. But Zuckerberg hinted that charging for “compute” could be one avenue for generating revenue from its AI technology, along with its traditional advertising business.
Zuckerberg ascribed his increasing confidence in Meta’s AI prospects to the company’s recently released Llama 3 large language model, and the technology’s consumer version of it, dubbed Meta AI in a few countries. Tens of millions of people have already tried Meta AI, Zuckerberg said, and the company is planning to roll it out to more users in the coming months.
Meta doesn’t generate any direct revenue when users interact with Meta AI right now, but Zuckerberg repeatedly pointed to the company’s track record of monetizing its products when they reach sufficient scale—he just didn’t say when that moment would be.
“What we’ve shown now is we have the ability to build leading models in our company, so I think it makes sense to go for it. And we’re going to. And I think it’s going to be a good long-term investment.”