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Meta’s stock price spiked as much as 11% on Thursday morning as investors reacted to the social media giant’s second-quarter earnings report the day before.
In the heat of tech company earnings, industry giants Google and Microsoft failed to compellingly show investors that their big spending on AI is paying off — in the near term, at least. The companies’ stock prices sank after their respective earnings reports, prompting fears that AI hype is easing, and investors’ patience with hefty AI investments is waning.
But Meta is shifting that narrative. The company on Wednesday afternoon posted better-than-expected sales and less-than-expected capital expenditures. Analysts had expected the company to spend a little over $9 billion, driven by the costs of its AI plans, but it spent $8.4 billion.
Meta has been working to develop a host of AI tools now embedded in its social media platforms — Facebook, Instagram, and Whatsapp. And Mark Zuckerberg is vying to make the company’s latest AI model, Llama 3.1, the most widely-used AI model by the end of 2024 and “the most advanced in the industry” by the beginning of next year.
“Meta’s investments in artificial intelligence boosted revenues in its core advertising business, leaving investors optimistic over the company’s business outlook,” wrote Lukman Otunuga, an analyst at FXTM, a foreign exchange trading broker. “This is certainly a bright spot for markets and may soothe concerns over the A.I. hype being overblown.”
Meta was able to show investors that it is monetizing AI, gaining their confidence even as it raised the lower end of its outlook for capital expenditures for the year. Meta had previously said it would spend between $35 billion and $40 billion; now it’s predicting it will spend at least $37 billion.
Bank of America analysts Justin Post and Nitin Bansal said they see Meta as a “top AI play” among internet companies, given its monetization of AI.