Meta Platforms Inc. is advancing rapidly in its development of artificial intelligence infrastructure, prompting even CEO Mark Zuckerberg to express some surprise at the pace of the company’s investment, CNBC reports.
Following the release of Meta’s third-quarter earnings report, Zuckerberg discussed the company’s quick progress in building out its data centers, servers, and chips necessary for AI initiatives.
During a conference call with analysts on Wednesday, Zuckerberg noted that Meta’s escalating costs are a direct result of the swift deployment of its AI resources.
“Going into the year, we had a range for what we thought we could potentially do, and we’ve been able to do more than we’ve kind of hoped and expected at the beginning of the year,” he stated.
As a result of this rapid expansion, Meta has raised the lower end of its capital expenditures guidance for 2024 to $38 billion from $37 billion, while maintaining a top-end estimate of $40 billion. Zuckerberg expressed optimism about the team’s execution.
“That execution makes me somewhat more optimistic that we’re going to be able to keep on building this out at a good pace,” he said.
The significant expenditures include purchases of Nvidia’s graphics processing units, and Meta has indicated that spending will increase substantially in 2025. Despite surpassing earnings and revenue expectations, Meta’s stock experienced a decline in after-hours trading due to concerns over weaker-than-expected user growth and rising expenses.
Analysts, including Barclays’ Ross Sandler, raised questions during the earnings call regarding the speed of building the extensive computing infrastructure necessary for generative AI, given challenges like energy requirements and the development timeline for custom AI chips. Zuckerberg praised Meta’s infrastructure team for effectively enhancing the company’s computing capabilities for projects such as the Llama family of large language models.
Wall Street has expressed unease about technology firms like Meta and Alphabet potentially overspending on infrastructure without yielding immediate returns. Zuckerberg acknowledged this concern in a previous interview, admitting there may be risks associated with overbuilding. However, he emphasized the importance of investing to avoid the pitfalls of underinvestment.
“The formula around building out the infrastructure is maybe not what investors want to hear in the near term, that we’re growing that… But, I just think that the opportunities here are really big, we’re going to continue investing significantly in this and I’m proud of the teams that are doing great work to stand up a large amount of capacity so that way we can deliver world-class models and world-class products.,” Zuckerberg explained.
The unit reported an operating loss of $4.4 billion in the third quarter and is expected to see “2024 operating losses increase meaningfully year-over-year” due to ongoing product development efforts and investments to expand its ecosystem.
