Mark Zuckerberg warns of stock volatility as Meta bets billions more on AI
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 multi-year AI spending spree that will precede any meaningful payoff.
Zuckerberg's Optimism
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," he stated.
Capital Expenditures
Meta announced that the capital expenditures to power its AI ambitions could total $40 billion this year, up to $5 billion more than previously earmarked in October. And costs are expected to increase in the years to come. "This is likely going to take several years," Zuckerberg emphasized.
Risk of the AI Arms Race
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.
Confidence in Meta's AI Prospects
Zuckerberg attributed 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 currently doesn't generate any direct revenue when users interact with Meta AI, but Zuckerberg repeatedly pointed to the company's track record of monetizing its products when they reach sufficient scale. "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," he expressed.
This story was originally featured on Fortune.com
