Shaun Krom, heading the Easy Asset Management Team, recently wrote an article about investing in companies that are driving AI into the economy. Using this lens, we look at Meta’s earnings that were released on Thursday 1 February. Meta’s 5 prong attack on being a leader in AI is:
1. Building a Scalable AI Infrastructure: Meta's 2021-2022 spending spree in tech infrastructure. Zuckerberg defends it as a strategic investment, particularly after underestimating Reels' needs. To avoid future bottlenecks, they've secured a massive supply of Nvidia H100 chips, essentially building a supercomputer for AI development. This aggressive spending, fueled by their booming profits, signals their commitment to "winning" the AI race. The target? "General AI" – models that can reason, plan, and even code. This tech could be the key to unlocking massive new markets and revenue streams.
2. Open-Sourcing the AI Engine: While Meta is sharing its foundational "Llama" models with developers, they're keeping their proprietary data and product implementations under private. This strategic move allows them to benefit from a global pool of AI talent while maintaining a competitive edge. They create an AI ecosystem where Meta sets the standards and reaps the downstream benefits. For investors, this means potential partnerships, licensing deals, and a constant flow of innovation around Meta's core AI tech.
3. Playing the Long Game: Forget short-term profits. Meta is investing heavily in long-term R&D, already developing future iterations of their Llama models (up to version 7!). This patient approach minimizes the risk of being outpaced by competitors and ensures they have the cutting-edge tech needed to dominate the AI landscape in the coming years.
4. Data is the New Gold: Meta's user data gives them a unique advantage in training their AI models. They understand user behavior and preferences on an unparalleled level, allowing them to develop highly personalized and engaging AI experiences. This translates to increased user engagement, which translates to higher advertising revenue – a key driver of Meta's stock price.
5. Experimentation Breeds Opportunity: Meta fosters a culture of rapid experimentation (unlike Google and Apple? – invest in businesses run by owners), allowing them to quickly test and refine new AI ideas. This agility keeps them ahead of the curve, identifying and capitalizing on emerging trends before competitors. This agility translates to a reduced risk of being blindsided by disruptive technologies and an increased chance of Meta capturing the next big thing in AI.
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