Meta’s AI spending spree is just fine with Wall Street

Meta’s eye-popping AI spending is mostly going towards the infrastructure that supports training and running AI models—such as servers, data centers, and a reported 600,000 Nvidia GPUs (which each cost roughly $30,000 each). It all adds up to the tune of $37 billion to $40 billion in expected 2024 capital expenditures, while the company said infrastructure spending “will be a significant driver of expense growth next year” as well. 

Zuckerberg focused some of his earnings call comments on explaining why this AI infrastructure shopping binge will pay off with increased revenue from the company’s various apps, new AI experiences, and shaping its continued work on the metaverse. 

The bottom line? Training more and more advanced AI models is expensive: Zuckerberg pointed out that while Meta’s newly released Llama 3 model is “already competitive with the most advanced models,” the company is already starting to work on Llama 4, which means planning for the computing power it will need going forward.

“The amount of compute needed to train Llama 4 will likely be almost 10x more than what we used to train Llama 3—and future models will continue to grow beyond that,” said Zuckerberg on the earnings call. “It’s hard to predict how this will trend multiple generations out into the future, but at this point, I’d rather risk building capacity before it is needed, rather than too late, given the long lead times for spinning up new infra projects.”

Not surprisingly, there were no comments given or questions asked by Wall Street analysts during the earnings call about the environmental impact of Meta’s AI infrastructure efforts. But there was plenty to discuss about the potential ROI of AI investments. Zuckerberg said that improving existing Meta products with AI would drive the most results in the short-term—over the next two years. “I think there’s a lot of upside” to improving recommendations and advertising experiences, he explained. 

But he warned that making money on new-gen AI products—like Meta AI, the AI chatbot available on Facebook, Instagram, and WhatsApp —will take a lot longer.

“We have a relatively long business cycle of starting a new product, scaling it to something that reaches a billion people or more, and only then really focusing on monetizing at scale,” he said. When it comes to products like Meta AI or AI Studio, the company’s new make-your-own AI chatbot offering which rolled out this week on Instagram, he added, “I don’t think that anyone should be surprised that I would expect that that will be years, right?” 

Of course, Wall Street has recently worried about the massive AI spending of other Big Tech firms and how long it would take for those investments to pay off, including at Microsoft, whose stock dropped after a narrow cloud earnings miss this week. 

But for now, it seems like as long as its AI-driven digital ad revenues stay strong—and keep in mind, the artificial intelligence used for Meta’s ad business uses the same traditional machine learning techniques they have used for years, not generative AI models—investors will remain patient, even as they wait for the potential future profits to roll in from the promise of gen AI. 

Sharon Goldman

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NEWSWORTHY

The EU AI Act goes into effect. It has been a long four years since it was initially proposed, but the European Union’s landmark artificial intelligence law officially went into force today, CNBC reported. In May, the regulation for how companies develop, use, and apply AI was given final approval by EU member states, lawmakers, and the European Commission—the executive body of the EU. But organizations won't be affected right away since most of the new law's provisions won’t actually take effect until at least 2026.

Hollywood’s video game performers strike over AI protections. Video game performers, including voice actors and motion capture workers, are picketing Warner Bros. Studios today for better protections from the unregulated use of AI, according to the Associated Press, The protest is the first since the group voted to strike last week and came after more than 18 months of negotiations with video game companies that stalled over protections around the use of AI.

AI music companies Suno and Udio push back on copyright lawsuit: "Labels see a threat to their market share." In June, major music labels Universal, Warner, and Sony, along with the music industry group RIAA, filed a lawsuit against AI music startups Suno and Udio for alleged copyright infringement. The two startups have now fired back with their first responses, arguing that they were "free to use copyrighted songs to train their models and claiming the music industry is abusing intellectual property to crush competition," according to Billboard.

ON OUR FEED

“We’ve worked hard to make it right." 

—OpenAI CEO Sam Altman today posted updates on X about OpenAI's safety efforts and a response to criticism by former employees about the company's nondisparagement terms and provisions that gave OpenAI the right to cancel vested equity of current and former employees. 

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Meta, Microsoft, and Google blew binding amounts of AI smoke during earnings—here's what we actually learned by Alexei Oreskovic

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BEFORE YOU GO

A16z says legacy CRM systems like Salesforce risk irrelevancy due to AI.  Three Andreessen Horowitz analysts said in a blog post that software used widely in sales to track customer leads and data—is headed to trouble due to AI. "We believe AI will so fundamentally reimagine the core system of record and the sales workflows that no incumbent is safe," they said. Speaking primarily about companies like Salesforce, the North American market leader in CRM, and rival Hubspot, the analysts posit that instead of a text-based database, "the core of the next sales platform will be multi-modal (text, image, voice, video), containing every customer insight from across the company." A platform that is AI native, they say, "will be able to extract more insight from a customer and their mindset than we could ever piece together with the tools we have today."