However, Zuckerberg is increasingly under pressure to keep pace in the fast-moving AI race with Silicon Valley groups such as OpenAI, Microsoft, and Alphabet’s Google, which has forced him to boost investment in the costly technology and infrastructure required to support his plans. Microsoft and Alphabet are expected to deliver updates on their own AI efforts in earnings reports tomorrow NZT.
Zuckerberg said on a call with analysts that he believed Meta “should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world”. This spending would have to grow “meaningfully before we make much revenue from some of these new products”, he added.
The after-hours fall in Meta’s shares today wiped billions of dollars off its market value.
It is a sharp reversal for a stock that had risen more than 40 per cent this year, having been in record territory since a bumper fourth-quarter earnings announcement in February during which it announced its first dividend and signalled a strong recovery from a recent advertising slump.
As part of its efforts to develop and integrate AI tools into its products, Meta has focused on introducing chatbots to its social media apps to boost engagement, as well as features for advertisers, and improving the targeting of its feeds.
This month it released a new version of the AI model behind its chatbots, Llama 3, which it said had vastly improved capabilities, including the ability to reason. Meta also unveiled a new generation of its AI custom-made chips.
In his opening remarks to investors on the earnings call, during which the shares continued to slide, Zuckerberg attempted to assuage investor fears over the spending by pointing to the company’s “strong track record” of monetisation.
To bring in revenue, Meta could scale business messaging, introduce advertising into user interactions with AI chatbots, and charge groups to use its bigger AI models, he said.
Zuckerberg also said Meta would continue to invest in his longer-term ambitions to build an avatar-filled metaverse, focusing on developing what he dubbed “wearable AI” — smart glasses with an embedded AI assistant.
Reality Labs, Meta’s virtual and augmented reality arm, posted losses of US$3.85b in the first quarter, about the same as the previous year, with the company adding it continued to expect operating losses to “increase meaningfully” year-over-year.
“Mark Zuckerberg’s ‘heads-up’ was reminiscent of what he once said about the metaverse. That didn’t exactly go so well, but this is different than Meta’s metaverse gamble because AI has real and practical use cases now,” said Forrester research director Mike Proulx.
“The question remains whether Meta can contend in the AI race while maintaining a strong financial position. To do this, expect to see more ‘metaverse’ resources diverted from Reality Labs to Meta’s AI initiatives,” he added.
Written by: Hannah Murphy
© Financial Times
