Meta Platforms CEO Mark Zuckerberg has been on an artificial intelligence spending blitz — and Wall Street does not seem to mind.
Zuckerberg has invested tens of billions of dollars in computing infrastructure and re and development, and he's worked tirelessly to implement AI across the internal organization and to enhance user engagement and ad targeting on Instagram and Facebook.
In the phase of these efforts, Zuckerberg has ripped a page out of New York Mets owner Steve Cohen's playbook and thrown huge amounts money at top AI talent to build out a "superintelligence" unit, with the goal of recruiting 50 top reers in the field.
Just how aggressive have these efforts been.
In a note to clients on Tuesday, Bank of America estimated that Zuckerberg's spending spree could add $1 billion in annual expenses, assuming 50 people at an average of $20 million in compensation.
Yes, $1 billion.
And yet, the Street has been willing to look past the jaw-dropping spending — and it's not difficult to see why, considering the opportunity AI brings on both cost savings and revenue growth opportunities.
The stock closed Monday at its first record high since mid-February, though we're ly seeing some fit-taking in Tuesday's overall down market.
Between the close on Friday, June 6, and Monday, s of Meta rose nearly 6% versus a 3. 4% advance for the S & P 500.
The June 6 date is relevant because over that weekend, Bloomberg News first reported that Meta was in talks to invest in Scale AI — the opening salvo in this spending spree.
Zuckerberg is far from alone in the urgency and recognition of the opportunity. Consider what name Amazon's chief executive, Andy Jassy, told Jim Cramer on Monday night on "Mad Money.
" "I think that AI and generative AI specifically is the most transformative nology of our lifetime, which is saying a lot given we've had the internet, we've had mobile, we've had the cloud.
But I think it's going to end up being the most transformative nology of our lifetime.
If your mission is to make customers' lifetimes easier and better everyday — and if you believe it's going to be the most transformative of our lifetime — you're going to invest very expansively, which is what we're doing, and you can see it everywhere.
" The phrase "invest very expansively" stands out, in particular.
Zuckerberg ly agrees, writing in a memo to employees Monday : "As the pace of AI gress accelerates, superintelligence is coming into sight.
I believe this will be the beginning of a new era for humanity, and I am fully committed to doing what it takes for Meta to lead the way.
" In the same memo obtained by CNBC, Zuckerberg laid out the internal structure for AI re at Meta. At the highest level, the efforts fall under what is being called Meta Superintelligence Labs (MSL).
Within MSL, Meta will house all of its "foundations, duct, and FAIR [Fundamental AI Re] teams, as well as a new lab focused on the next generation of models.
" One of the two people tapped to lead MSL is Alexandr Wang, the now-former CEO of Scale AI whose hiring earlier this month underscored Zuckerberg's aggressiveness in hiring AI talent.
Just days after that initial Bloomberg report, Meta officially invested more than $14 billion to acquire a 49% stake in ScaleAI — a move viewed by many as an "acquihire" because a key factor behind the move was bringing Wang on board.
Wang will serve as Meta's chief AI officer. The other co-leader of MSL is the recently hired Nat Friedman, CEO of GitLabs from 2018 to 2022.
OpenAI CEO Sam Altman has also claimed that Zuckerberg, who has been personally involved in the hiring of AI talent, has offered up signing bonuses of as much as $100 million to poach top talent from leading AI organizations his own.
While there's been some pushback on Altman's claim, the general point stands: Zuckerberg has opened up the wallet. Bank of America's estimate makes that.
Additional new hires brought in to aide Meta's AI efforts come from OpenAI, Google, and Anthropic and include.
Here's how Zuckerberg described the resumes of the hires in the memo obtained by CNBC: Trapit Bansal — pioneered RL on chain of thought and co-creator of o-series models at OpenAI.
Shuchao Bi — co-creator of GPT-4o voice mode and o4-mini. Previously led multimodal post-training at OpenAI.
Huiwen Chang — co-creator of GPT-4o's image generation, and previously invented MaskGIT and Muse text-to-image architectures at Google Re. Ji Lin — helped build o3/o4-mini, GPT-4o, GPT-4.
5, o4-imagegen, and Operator reasoning stack. Joel Pobar — inference at Anthropic. Previously at Meta for 11 years on HHVM, Hack, Flow, React, performance tooling, and machine learning.
Hongyu Ren — co-creator of GPT-4o, 4o-mini, o1-mini, o3-mini, o3 and o4-mini. Previously leading a group for post-training at OpenAI.
Johan Schalkwyk — former Google Fellow, early contributor to Sesame, and nical lead for Maya. Pei Sun — post-training, coding, and reasoning for Gemini at Google DeepMind.
Previously created the last two generations of Waymo's perception models. Jiahui Yu — co-creator of o3, o4-mini, GPT-4. 1 and GPT-4o.
Previously led the perception team at OpenAI and co-led multimodal at Gemini. Shengjia Zhao — co-creator of ChatGPT, GPT-4, all mini models, 4. Previously led synthetic data at OpenAI.
"I'm optimistic that this new influx of talent and parallel apach to model development will set us up to der on the mise of personal superintelligence for everyone.
We have even more great people at all levels joining this effort in the coming weeks, so stay tuned. I'm excited to dive in and get to work," Zuckerberg wrote.
While Zuckerberg ly has no issue paying up for talent, the question is: At what point would investors start to take issue. As we saw in 2022, sometimes the market will recoil at aggressive spending.
This time around, our belief is that as long as Meta can show material gress with to existing ducts and more capable large language models, Zuckerberg will continue to get the pass on AI spend.
These investments have already dered benefits to user engagement and ad targeting; in other words, they've made the core Family of Apps better.
However, its Llama large language model — which underpins its ChatGPT rival known as Meta AI — is now on its fourth version and has failed to impress.
It's lagging behind competing models from the s of Google and OpenAI in third-party testing, according to the LMArena. Ai leaderboard.
Imving Llama is no doubt a key initiative of the new unit, and investors will want to see gress here as they evaluate the hefty spending.
While it's great to see Meta implement AI across the organization to the benefit of existing revenue s, it is new revenue s — stemming from AI initiatives Llama — that will really get investors excited the spend and pel s higher over the long term.
Another possibility: Meta's AI-infused smart glasses, which are part of its Reality Labs division, stand to benefit from a more capable Meta AI model.
As the model imves, we wouldn't be surprised to see additional offerings, such as a premium Llama subscription and new tools for customers.
In the end, as is the case with all those pumping huge amounts into AI re, it comes down to the companies' ability to monetize that re.
Fortunately, Meta has plenty of optionality on this front, both in terms of additional cost savings internally, along with the ven ability to enhance existing ducts and build out new ones.
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