Meta Platforms is stepping carefully between bold ambitions and overdoing. Its move into artificial intelligence, from the $14 billion acquisition of Scale AI to billions spent on infrastructure, shows us its determination, but the recent pause on the stock indicates investors are getting nervous.
AI is definitely the future, but Wall Street will need to see it become monetized, and not only its expensive experiments. For the time being, Meta seems to be a company attempting to persuade the market that scale equals dominance, but the reality is that innovation alone will not result in long-term gains.
Meta fundamentals are beyond doubt and are very strong, its $47 billion in Q2 revenue with a 43% operating margin is an eye-opener to reflect that its ad business continues to dominate alone. Meta’s Facebook, Instagram, and WhatsApp controlling billions of daily users, provides it with a singular ability to disperse AI products at an unparalleled rate.
However, it all lies in the way it is implemented. Unlike Google and Microsoft, Meta has yet to show how it will produce sustainable streams of revenue from its AI investments. Rather, its lavish expenditures, $17 billion in Q2 capex, raise suspicions about whether these actions will build value or merely inflate costs. Investors are waiting and watching to determine if Meta’s AI strategy bears fruit or is simply an extremely costly gamble.
Meta might not conquer AI like it conquers social media, but its healthy balance sheet and ad superiority give it the freedom to try while continuing to deliver decent growth. Meta’s tale today is not whether it can expand, it obviously can expand, but it is more about how. If its AI wagers are able to pay off, yesterday’s $740 could be cheaply bought in retrospection.
However, if expenditures outpace returns, shareholders might realize that Meta’s actual issue is not constructing AI, but persuading the market that its destiny is greater than an expensive promise.
