Zuckerberg said that building leading-edge artificial intelligence is a larger task that may take several years. This statement further raised market concerns about spending, and Meta's post-market decline widened to nearly 20% at one point. What worries the market even more is that while investing heavily in AI, Zuckerberg still persists in his obsession with the metaverse.
Even though the stock price plummeted, it did not shake Zack Berkeley's determination to push for AI in the slightest.
On Wednesday local time, Meta announced its first-quarter results. Revenue and profit were higher than expected. Growth in core advertising revenue accelerated, but expectations of a sharp increase in AI spending scared the market, and stock prices plummeted after the market. As of press time, the company fell more than 14% in overnight trading.
As the stock price dived in, the Meta earnings call began. Zuckerberg defended the AI investment frenzy and vowed to increase spending to make Meta “the world's leading artificial intelligence company.”
Zuckerberg said he believes Meta “should substantially increase investment over the next few years to build more advanced models and the world's largest artificial intelligence service.” He added that “before we can generate significant revenue from these new products,” these expenses must “grow meaningfully.”
Zuckerberg also admits that the payback may take some time:
It is worth mentioning that at this stage of our product strategy, our stock prices have historically fluctuated a lot. We are investing in expanding a new product, but we are not yet profitable.
Building leading-edge artificial intelligence will also be a larger task than any other experience we add to the app, which could take years.
Zuckerberg's statement further raised investors' concerns about spending. Wednesday's sharp drop caused Meta to erase all gains since its last results.
To ease market concerns about spending, Zuckerberg mentioned the company's “good record” in terms of profitability. He said that in order to increase revenue, Meta could expand commercial information, introduce advertisements in user interactions with artificial intelligence chatbots, and charge some AI model users.
Meta raised this year's capital expenditure guidance in its first-quarter earnings report, saying it will significantly raise this year's capital expenditure forecast from US$30 billion to US$37 billion to US$35 billion to US$40 billion in order to accelerate infrastructure investment to support the AI roadmap. Meta also expects capital spending to continue to rise next year.
By comparison, Meta's total capital expenditure last year was $28.1 billion. Last year, against the backdrop of a severe macroeconomic situation, Meta drastic layoffs and cost cuts, calling 2023 the “year of efficiency.”
However, as a new round of AI contests is in full swing in Silicon Valley, and tech giants such as Microsoft and Google are catching up with me, Zuckerberg is also facing increasing pressure to increase investment in AI.
What worries the market even more is that while investing heavily in AI, Zuckerberg still persists in his obsession with the metaverse. He said Meta will continue to invest in his long-term goal of building a virtual world full of avatars.
Meta's virtual and augmented reality division, Reality Labs, lost $3.85 billion in the first quarter of this year, roughly the same as the same period last year, but Meta expects the division's losses to “increase significantly” over the same period last year.
According to media quoting Mike Proulx, head of Forrester's research, “The question is whether Meta can participate in the AI race while maintaining a strong financial position. To do this, we want to see more metaverse resources transferred to AI.”
Editor/Somer
