Meta's Mark Zuckerberg surprised by the pace of spending on AI


Meta Platform Inc. CEO Mark Zuckerberg arrives for the Meta Connect event in Menlo Park, California on September 25, 2024.

David Paul Morris | Bloomberg | getty images


meta There has been such a rush to build out its massive data centers and computing infrastructure for artificial intelligence projects that even CEO Mark Zuckerberg is a little surprised.

In a call with analysts Wednesday after Meta's third-quarter earnings report, Zuckerberg explained to investors how Meta's rising costs for the year are tied to the speed at which employees get the data to get AI up and running. The center is capable of obtaining servers and chips.

“Going into the year, we had a ceiling for what we thought we could potentially do, and we've been able to do much more than we hoped and expected at the beginning of the year,” Zuckerberg said.

This also means that investors will have to gear up for more spending. Meta raised the low end of its capital spending guidance for 2024 to $38 billion from $37 billion. The top line is still $40 billion.

“It's actually something that I'm really happy about that the team is doing well,” Zuckerberg said. “This execution makes me somewhat optimistic that we'll be able to build this out at a good pace.”

Meta said that spending, which includes Nvidia's billion-dollar purchase of graphics processing units, will increase significantly in 2025.

Meta shares fell in extended trading on Wednesday despite the company's earnings and revenue decline. Rising costs as well as lower than expected user growth were part of the concern.

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On the earnings call, Barclays analyst Ross Sandler asked Zuckerberg what he would need to reach his goals around generative AI, given potential hurdles like energy requirements and the time required to develop his own custom AI-specific chips. How quickly Meta can build massive computing infrastructure.

Zuckerberg responded by praising Meta's infrastructure team, which he said was doing “pretty well” in building out more computing capacity for various AI projects, such as the Llama family of large language models.

Wall Street has become concerned that tech giants like Meta and alphabet Spending too much on infrastructure without seeing immediate returns. It's a topic Zuckerberg acknowledged in an interview with Bloomberg in July, telling Emily Chang that it's likely companies are “building too much now.” However, the risks of underinvestment are too high, he said.

“The formula for building infrastructure is probably not what investors want to hear in the near term, that we're scaling it up,” Zuckerberg said Wednesday. “But, I think the opportunity here is really big, we will continue to invest significantly in it and I'm proud of the teams who are doing a great job of adding huge amounts of capacity so that we can build that world-class model and Provide world class products.”

This is not the only place where investors have to bear huge expenses.

Meta's Reality Labs unit, home of Metaverse technologies, reported a $4.4 billion operating loss in the third quarter. The company said it expects “2024 operating loss to expand meaningfully year-over-year due to our ongoing product development efforts and investments to advance our ecosystem.”

Watch: Meta Stock Falls After Earnings “Wrong Reaction.”

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