Meta sounds profit warning as AI spending soars

Meta sounds profit warning as AI spending soars

Meta CEO Mark Zuckerberg has sounded a warning to investors that it will take considerable time before any significant returns are made on generative artificial intelligence (AI).

The chief of Facebook, Instagram, and Whatsapp has braced expectations for lower profits for the foreseeable future as he strives to keep pace with the likes of OpenAI, Microsoft, and Google in the rapidly evolving AI race.

Just last week, the social media giant rolled out its AI assistant across its major platforms.

On Wednesday (24 April), Meta posted a revenue increase of 27% and witnessed its profits double over the first quarter, but that has not allayed investor fears as Zuckerberg continues his spending spree on AI. The intensive cost and computing power required to make gains in new technology means spending forecasts for the year have increased from £35 billion to $40 billion.

This headline resourcing will drive investments in developing AI infrastructure, including data centres and research costs. Billions have already been spent on GPUs, the chips that perform complex demands to power AI systems.

Further caution was urged with revenue for the second quarter expected to fall short of analysts’ expectations, adding to concern from investors with the price of stock falling in after-hours trading. Meta’s shares had plunged 11%, down to $493.50.

A bullish Zuckerberg told analysts Meta “should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world”. As part of this vision, he believes the spending will need to increase “meaningfully before we make much revenue from some of these new products”.

Meta makes plans to capitalize on AI

The CEO appeared to be cognizant of investor apprehension on spending rises and sliding share prices as he pointed to Meta’s “strong track record” of monetization. To balance spending commitments, the company is eyeing gains through AI advances in its existing services.

Zuckerberg mooted advances in business messaging, introducing advertising to AI chatbot interactions, and scaling up group charges for use of its bigger AI programs. He also vowed to oversee longer-term ambitions to deliver an avatar-filled metaverse, together with the development of wearable devices like smart glasses with an embedded AI assistant.

These goals will be tempered by sharp losses incurred by Reality Labs, Meta’s virtual and hardware arm, with a deficit of almost $3.8 billion in the first quarter, together with a revenue of $440 million.

Image credit: Julio Lopez/Pexels

The post “Meta sounds profit warning as AI spending soars” by Graeme Hanna was published on 04/25/2024 by