Meta is one of the technology companies that has allocated the most resources to artificial intelligence in the last two years. The company is building two large data centers in the United States alone, and it is planned to spend up to $600 billion on infrastructure in the next three years. These figures are remarkable in the technology world. However, when it comes to the financial aspect of the business, investors question this aggressive growth. Tension is increasing, especially since there is no concrete product corresponding to it yet.
Last week, Meta shared its quarterly financial results with the public. According to these results, the company’s operating expenses increased by 7 billion dollars compared to a year ago. Capital expenditures reached almost 20 billion dollars. All this increase is largely due to investments in artificial intelligence infrastructure and talented engineering staff. However, there is no concrete framework for which product or revenue model these expenses will return to the company. In this case, the patience of investors is gradually decreasing.
Meta is turning to new generation artificial intelligence models, but investor expectations are more concrete
The company’s CEO, Mark Zuckerberg, said in his meeting with investors that these expenses are just the beginning. Moreover, he stated that the new models developed under the umbrella of Superintelligence Lab will reach capacities that the industry is not used to. However, these statements did not include details such as date, product name or market launch plan. For this very reason, the pressure from investors has increased. Zuckerberg’s “leading models” discourse creates expectations but still lacks clarity. If everything remains only at the vision level, it damages market confidence.
The reaction of the market after the meeting clearly revealed this distrust. Meta shares lost 12 percent of their value in a short time. This decline caused approximately $200 billion to be erased from the company’s market value. Meanwhile, Meta’s quarterly profit was around 20 billion dollars. But now investors are focusing beyond profit on business models that will bring sustainable income in the future. Despite everything, although Meta’s profitability is strong, this is not considered sufficient.
Meta’s artificial intelligence products are far from expectations for now. While the Meta AI assistant has over a billion users, that number is due to its integration into the company’s massive platforms like Facebook and Instagram. Therefore, it is difficult to say that the assistant is experiencing real growth based on user preference. On the other hand, an independent artificial intelligence product that appeals directly to the user, such as ChatGPT, has not been produced. The video production tool called Vibes has attracted attention, but it is still inadequate as a business model. Examples like these show that Meta is just taking experimental steps in the field of AI.
In addition, although Vanguard smart glasses, introduced in October, made a big impact, they do not give the impression of a product directly integrated with artificial intelligence. The glasses continue the hardware-focused vision of Meta’s Reality Labs unit. However, the expectation in the market is towards solutions with much deeper AI integration. Although Zuckerberg said that they will continue to develop these products, the product strategy is still not fully understood. This further increases the existing uncertainty. There seems to be a mismatch between the company’s vision on the AI side and the demand in the market.
Similar expenses of rival companies do not cause the same reaction from investors. Google and Nvidia have been able to turn their AI investments into projects that will directly correlate with profit. OpenAI, on the other hand, has generated annual revenue approaching 20 billion dollars even with much more limited resources. Moreover, the fact that they have achieved this with independent and fast-growing products provides great confidence for investors. Meta does not currently have a product story that would give the same confidence. This makes the value of the investments questionable.
Zuckerberg talked frequently about future products at the meeting, but did not give examples of products introduced in the past. This situation is a signal for investors. The expectation is no longer just vision statements, but the promotion of products that directly reach the user and generate income. Saying “We have new models, we will announce them when the time comes” no longer satisfies the market. Besides all this, investors’ expectations regarding product development are quite clear. Meta’s inability to respond to this is wearing out patience.
Although the Superintelligence unit was established only four months ago, expectations are tempered by the fact that a product has not been launched in that time. Although the company’s current position seems suitable for intelligence-oriented technologies, there are obvious shortcomings in productization and generating a revenue model. It is expected to produce concrete solutions by integrating user data obtained from Facebook and Instagram with artificial intelligence. Vibes could be a step in that direction, but it doesn’t have enough depth for now. On the other hand, the issue of “artificial intelligence solutions specific to the business world” remains unclear.
It is still not clearly defined what role the company will play in this high-cost investment period. Meta’s artificial intelligence expenses are increasing rapidly, but the question of what these investments will turn into is unanswered for now. If clearer answers to this question do not come in the coming months, it will be inevitable for investor reactions to increase.