It’s official, Meta Platforms (NASDAQ:META | META Price Prediction) is getting into the business of selling extra AI compute to others. The big news sent shares of the social-media and AI fast-mover up close to 9% in a single session of trade. While shares were incredibly cheap going into the session, the news shouldn’t have come as such a surprise, especially since Mark Zuckerberg floated the idea around previously.
Indeed, Meta Platforms has been spending serious cash on the AI buildout, with perhaps more of a “Mad Max” sense of urgency than some of the other hyperscalers.
After all, AI data centers in tents are a testament to the kind of demand that needs to come online to meet the demand for next-generation AI applications that could really kick off the monetization inflection point. In any case, add Meta to the list of hyperscalers. It’s a new entrant, but it’s one that might just have a bit more muscle as the great AI buildout continues.
Of course, it might seem tougher to play from behind as a hyperscaler. That said, in the AI era, I do think that starting fresh is a huge advantage. For Meta Platforms, it’s getting into the data center business at the right time. It doesn’t have to worry about legacy infrastructure and all the sort.
It’s built infrastructure to serve itself, and, all the while, it’s developed the expertise when it comes to procuring the components and getting everything up and running. With a ton of AI demand and investors looking for ROIs rather than just CapEx, Meta certainly stands out as a name that might be ready to move on as it transforms something expensive and uncertain into cold, hard cash.
Meta Platforms: The neocloud giant that could win big
In my view, Meta is an agile, neocloud-esque kind of AI data center play, one with profoundly deep pockets that the smaller neoclouds can only dream about matching. And let’s not forget about the extreme levels of profitability. Perhaps there was a reason why shares of Nebius Group (NASDAQ:NBIS) imploded 17% in a single day.
Demand for bare metal compute without the added complexity of existing platforms might actually grant Meta Platforms the upper hand as the hyperscaler race collides with an agentics-driven inference inflection point.
Add Meta’s very aggressive custom silicon roadmap (iterations every six months) and Mark Zuckerberg’s willingness to move fast (but hopefully not break things), and it feels like Meta Compute is the new, hyper-grower in the AI compute race.
The bottom line
While the nearly 10% surge on Canada Day seems like a bit of an overreaction, I still think the stock is priced at a significant discount.
The name trades at 22.30 times trailing price-to-earnings (P/E), which I think makes little sense, especially when you consider that Meta Compute might have what it takes to outmuscle its hyperscaler peers. It has the agility of a neocloud with the economies of scale of a hyperscaler giant.
I think that’s a formula for success and perhaps new all-time highs sooner rather than later. If Zuckerberg and company get Meta Compute right, I think it won’t take long before Meta Platforms breaks past the $2 trillion market cap mark. Maybe, just maybe, Meta Platforms will lead the Magnificent Seven to higher highs again.
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