Be prepared for turbulence and be patient. That was Mark Zuckerberg’s message to Meta shareholders on Wednesday as he explained his decision to pour tens of billions of dollars into a multi-year AI buying spree that will precede a significant payout.
The co-founder and CEO of Meta, which owns Instagram, Facebook and WhatsApp, said he has recently become more optimistic about the company’s prospects of dominating the highly competitive market for generative AI services and that he is on board The conclusion was that “it works”. Sense to try it.
That may not sit well with investors, Zuckerberg acknowledged during the company’s first-quarter earnings call — and shares of Meta fell more than 15% in after-hours trading during his speech. “At this stage of our product playbook, where we are investing in a new product and scaling it but not yet monetizing it, we have historically seen a lot of volatility in our stocks.”
Meta said on Wednesday that capital spending to realize its AI ambitions could reach $40 billion this year, up to $5 billion more than forecast in October. And costs will only rise in the coming years, the company said. “It will probably take several years,” he said.
But Zuckerberg also stressed that “smart investors” will recognize the opportunity 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 underlines the risk of the AI arms race to which Meta is committed. Microsoft reportedly plans to spend up to $100 billion to build a specialized AI data center with ChatGPT maker OpenAI. And Google owner Alphabet has been investing heavily in AI for years.
While Google and Microsoft both have cloud companies that serve as a means to monetize their AI investments, Meta is not in the cloud business. But Zuckerberg suggested that charging for “computing power,” alongside the traditional advertising business, could be a way to generate revenue from its AI technology.
Zuckerberg attributed his increasing confidence in Meta’s AI prospects to the company’s recently released large language model Llama 3 and the consumer version of the technology, known in some countries as Meta AI. Tens of millions of people have already tried Meta AI, Zuckerberg said, and the company plans to roll it out to more users in the coming months.
Meta currently doesn’t directly generate 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 – he just didn’t say when that time would be.
“What we’ve shown now is that we have the ability to build leading models within our company, so I think it makes sense to jump into that. And we will do that too. And I think it will be a good long-term investment.” “
This story was originally published on Fortune.com