META announced that it will expand its AI infrastructure through 350,000 Nvidia H100 AI GPUs (NVDA) by the end of the year. Considering the average price per GPU (graphics processing unit) is $30,000, that investment cost is approximately $10.5 billion. What does this mean for those investing in the meta or his AI as a whole?
KeyBanc Managing Director Justin Patterson joins Yahoo Finance to discuss what investors should look out for when considering investing in meta, AI, and more.
Patterson explains what investors should expect from Meta CEO Mark Zuckerberg: “I think Mark will just flesh out this AI strategy a little bit more,” he said. We're hoping for more to come. We plan to develop our latest model, the Rama 3, sometime in 2018.'' There was a tease for more connected devices. '' He continued, “The other side would be, what is the current state of the core ad platforms? The ad market appears to have continued its recovery in the fourth quarter, heading into the beginning of the year.'' We also saw some positive advance announcements.”
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Editor's note: This article was written by Nicholas Jacobino
video transcript
Sheena Smith: Meta that doubles artificial intelligence. CEO Mark Zuckerberg announced that the tech giant is moving deeper into AI, which will require what it quotes as “massive computing infrastructure.” So Meta says he plans to build all of this using his 350,000 graphics processing units (GPUs) from NVIDIA.
And looking at the stock price reaction about 15 minutes after the start of trading this morning, it was only up about 1.5%. We would like to bring on board Justin Patterson, who is the managing director of KeyBanc. More friends have joined us.
Justin, let's first talk a little bit about what exactly this means for Meta's stock price going forward. Because we know this is his name that will definitely recover in 2023. The stock price has increased about 180% in the last year alone. So how big of a catalyst do you think these AI plans will be for stock prices?
Justin Patterson: Yes, great question. If you look at our results in 2023, a lot of it was a year of efficiency costs that came from our business. Yes, earnings from late reels and currencies have re-accelerated. However, if we look to 2024, revenue growth will be more important this year.
So as we see these AI investments coming into the business, it's driving engagement on Meta, positioning new revenue streams, driving price growth from the advertising side, and driving conversations with OpenAI and Google. will begin to position Meta more as a competitor. . So I'm pretty bullish on the AI movement in the meta here.
Brad Smith: I mean, you can't just go from a year of efficiency to a year of rain on AI, right? So, what do investors expect and how do meta-platforms actually give this year's theme? Or what would be the best way to summarize the settings?
Justin Patterson: It's strange to say that it will make it rain. They were already making rain last year. Capital investment was about $28 billion, but he's already forecasting $30 billion to $35 billion. That's a significant amount of investment in AI. This year we're going to have what I'd call light rain to much larger rainstorms.
And some of that is already happening within AI, within the ad tech stack, where you've seen revenue growth start to accelerate up to 20%. A lot of that is AI investment to drive better content recommendations, which increases time spent in Reels, giving you more time and opportunity to serve ads and drive ad growth. So I view this as a continuation of revenue growth that maintains some of the initial foundation that was built in 2023.
Sheena Smith: Looking ahead to Q4 results due in just a few weeks, what will be the top priority when it comes to AI efforts and Meta's other top priorities next year? . Or what are the top two things you want to hear or want to hear from Zuckerberg?
Justin Patterson: Well, we're going to flesh out this AI strategy a little bit more. So Mark teased in his comments yesterday that he expects more to come. His latest model, Llama 3, is expected to be developed by the end of the year. There were some teases about more connected devices in there. Ray-Ban products seem to be selling well. So how does he think about where we are in his AI investment, what the initial returns are going to be, etc. So I'm going to call it the AI bucket.
The other aspect is, what is the state of the core advertising platform right now? The advertising market looks set to continue its recovery in the fourth quarter. There have been some positive pre-announcements to start the year. In other words, this year will be a good year to call mid-teens growth as the meta has tough comps in the second half. That will be viewed positively by investors.
