Does the world have too much compute or not enough?
Meta’s new cloud business — selling excess compute capacity to outside customers — is confusing on its face. For years, the big tech companies have insisted their problem is a shortage of compute, not a surplus. If they’ve now hoarded so much of it they can peddle the leftovers, that’s a bad look, at best. At worst, it suggests Meta can’t find anything better to do with the chips it’s been stockpiling and that its AI efforts may be struggling.
Just eight months ago, Zuckerberg struck a very different note: Meta would use any extra compute it had “to accelerate our core [advertising and apps] business — which continues to be able to profitably use much more compute than we’ve been able to throw at it,” he said in October.
What’s changed? Investors are losing patience. Meta’s stock had dropped 14% this year as shareholders questioned what the company was getting for the $135 billion in projected capex. Alphabet and Amazon’s shares have risen — same AI spending increases, but paired with big jumps in cloud revenue.
Squeezing a few extra dollars out of consumers by adding tiered subscriptions to Instagram and charging power users of its chatbot wasn’t going to be enough. Spinning up a new revenue line — one tied explicitly to the billions its spending on AI — seemed to do the trick; Meta’s shares rose 9% on Bloomberg’s report.
There’s a difference between discovering you have a surplus and strategically stockpiling a resource with plans to resell it. Amazon built AWS to serve its own business long before it realized it could make a boatload of money selling the same service to other companies. Meta, a software and ad company, could just as easily be a customer of the hyperscalers rather than a competitor to them. But Zuckerberg likes being on the bleeding edge of tech.
The market has made its preferences clear: the beatings will continue until cash flow improves.