Meta is being discounted due to:
1. Aggresive CapEx relative to revenue
2. History of poor capital allocation with Metaverse
I would like to point out that it is silly to compare the previous Metaverse investment with the AI buildout investment. Metaverse was essentially a new unknown world/market that Meta, for some reason, decided to go for. While, the AI buildout is a worldwide phenomenon with **proven benefits on Meta's own advert targeting algorithm,** in addition to software engineering and productivity.
There is already demands for AI products, unlike Metaverse. So it is only logical for Meta (and big techs) to spend into AI. It would probably be stupid not to continuously spend and improve their own products with AI.
Also, the most recently announced plans for selling compute is, in my opinion, a good move. Azure/AWS/GCP is so high-margin and profitable that investors sometimes ignore other numbers except for cloud business growth (especially with Microsoft).
Meta has always just been: Social media + Ads.
(Well, plus some glasses that's losing money each year, and a few open-source models with zero profits)
So, expanding to selling cloud business is a major step that would lean Meta closer to Amazon, Microsoft, and Alphabet, no?
Google did the same when they got into Youtube, GCP, Waymo. Amazon with AWS, MGM production. Microsoft with Azure, LinkedIn, Github, Activision.
I think this is a well-justified move for Meta.
Thoughts?
I wrote my full takeaway on Meta here: [https://economiyaki.substack.com/p/metas-big-ai-bet?r=2wzuop](https://economiyaki.substack.com/p/metas-big-ai-bet?r=2wzuop)
