Meta's Best Week Since 2024: Compute to the Rescue
Meta spent a year in the penalty box for its AI spending. Then it revealed a plan to recoup the costs.
Share prices jumped 6% on Friday and roughly 15% for the week—the best run since early 2024—after Meta presented Wall Street with a concrete strategy to monetize its AI infrastructure through Meta Compute.
The Big Picture:
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Meta's stock rose about 6% on Friday and roughly 15% across the week. This wasn't due to advertising, but rather a story centered around compute.
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The catalyst: Meta Compute, a plan to sell AI computing capacity and models to external customers, joining Amazon, Microsoft, and Google in the market.
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Investors had been anxious about Meta's substantial AI capital spending with no clear return path. The company's offer to rent out its spare AI compute eased these concerns.
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Mark Zuckerberg had previously hinted at an AI cloud business, turning a cost center into a revenue generator.
Supporting Details:
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Meta shipped Muse Image, a new image model, and is pushing its own MTIA chip into production to reduce reliance on Nvidia.
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Analysts predict that monetizing each gigawatt of compute at a $25bn rate could boost EPS by around 20%. Options volume more than tripled the 30-day average.
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Target prices for Meta's stock range from about $720 to roughly $869 over the next twelve months.
The Catch:
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Meta Compute hasn't sold anything yet, and AWS, Azure, and Google Cloud have a significant head start.
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The positive news also raises concerns about whether Meta bought more compute than it can use.
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Despite record revenues, Meta cut 8,000 jobs.