Is Meta's $14.3 Billion Bet on Scale AI Too Little, Too Late?

Big has not been shy opening the pocketbook for artificial intelligence (AI)-related investments over the last few years

Many of these deals involved alliances with big leaders, who swiftly integrated a host of new AI-powered ducts and services into their legacy ecosystems

It chose to allocate its capital expenditure (capex) budget to custom silicon chips, new wearable, and building its own large language model (LLM)

Let's explore some of the more notable AI deals that big has made in recent years

From there, I'll detail the underlying thesis behind Meta's interest in Scale AI, and why the timing of this deal is so important

Is Meta late to the AI party

Microsoft was the first major company to make a mark in the AI landscape

The strategic rationale behind this deal was to integrate OpenAI's services into Microsoft's Azure cloud platform

Amazon ed in Microsoft's footsteps

Similar to Microsoft's integration of ChatGPT into the Azure ecosystem, the partnership with Anthropic has so far revolved around leading cloud platform Amazon Web Services (AWS)

Image source: Getty Images

How have these deals panned out so far

It's one thing to outlay significant capital toward new assets

But how beneficial have these deals been for big so far

Management pointed out that 16 points of this growth (roughly half) were attributable to AI services

While this growth is impressive, there are some subtle nuances that investors should be aware of as well

First, OpenAI recently signed a new cloud deal with Alphabet

These new relationships could suggest that OpenAI is looking for strategic opportunities beyond its existing relationship with Microsoft

For that reason, it's hard to ject how accretive Microsoft's investment in OpenAI will be going forward

On top of that, the Anthropic and OpenAI deals primarily revolve around cloud computing services

While this is a critical component of the AI narrative, it's not entirely related to or competitive with Meta -- which mostly seeks to monetize consumer engagement through social media, gaming, and the metaverse

Meta is scaling for the future, and its timing looks pretty smart Then there's Meta Platforms' deal with Scale AI

One of the pillars supporting this deal was that it helped pave the way for a new component of the company's ecosystem, known as Meta Superintelligence Labs (MSL)

Scale AI CEO Alexander Wang now leads MSL as Chief AI Officer

In addition to the Scale AI team, Meta has hired a number of nologists and reers from OpenAI, GitHub, Anthropic, and Alphabet to build the MSL team

Meta's largest source of revenue and fits stems from its advertising empire

However, Meta's advertising model relies on predictive analytics around which ads users actually click on

This data is used to train recommendation models in order to ads that will actually convert to clicks and sales from its users

Scale AI is a data labeling platform that can be used to augment and fine-tune Meta's existing ad targeting niques

Although Microsoft and Amazon have been able to jump-start their respective cloud operations thanks to their aggressive and early moves in the AI start-up landscape, I think Meta may have been more calculated in the development of its own roadmap

In my eyes, Microsoft could face rising competition from Oracle and Alphabet in the cloud arena

Meanwhile, investors will ly want to see how Amazon plans to integrate AI beyond AWS to source further growth from its other es

With Scale AI and a host of new hires now closely aligned across Meta's various applications and services, I think the company is uniquely positioned to bolster its existing AI platforms while others in the big landscape now face rising competition and may need to pivot

While it may have looked Meta's big peers were sing right by, I think the company's recent investments and creation of its new AI re lab were perfectly timed

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors

Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, and Microsoft

The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle

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