Meta stock soars as Mark Zuckerberg explores cloud business
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Meta shares soared nearly 9% Wednesday on a report that the company is wading into the business of selling cloud computing services and access to AI models.
Why it matters: The booming AI economy has triggered insatiable demand for data processing power, enriching the likes of Amazon, Google and Microsoft.
Zoom in: The Facebook and Instagram owner is forming a business to capitalize on the excess computing power it's accumulated via huge investments in data centers and AI infrastructure, Bloomberg reports.
- The plan could include selling access to AI models, similar to how Amazon Web Services provides access via its Bedrock offering.
- "Meta would run the data centers and chips that power the models, including its own Muse Spark models, and charge developers to access them," Bloomberg reported.
- The company is also considering selling excess "raw" computing power to outside customers.
The impact: Neocloud stocks went into retreat Wednesday on concerns that Meta could pose a threat.
- CoreWeave closed down almost 14% Wednesday, and Nebius fell 17%.
- "One can absolutely debate the will-they-won't-they, but we do know that Meta is sitting on one of the largest data center footprints in the world," Bernstein analyst Madison Rezaei wrote in a research note.
- Rezaei estimates that the company has already accumulated 20 gigawatts in global capacity and expects to bring another 14GW online in the next few years.
- "This scale easily rivals cloud provider footprints," she added.
Meta declined to comment on the report, but Mark Zuckerberg himself had already suggested that this was a possibility.
- He told investors in May that selling compute is "definitely on the table," adding that "almost every week there are different companies that come to us from outside asking us to both stand up an API service, or asking if we have compute that they could buy from us at some premium to what we've bought it at."
- "We haven't done that yet, because we think that we have a use for the compute, but obviously if we get to a point where we feel that we have overbuilt, then that is an option that we have, and that is partially what gives us confidence in investing in building this out," he said.
The bottom line: The positive market reaction may only embolden Zuck to reach for the clouds.
