Meta sounds profit warning as AI spending soars

Meta CEO Mark Zuckerberg has warned investors that it will take a long time to see any significant returns on generative artificial intelligence (AI).

The head of Facebook, Instagram and WhatsApp expects lower profits in the near future as he tries to keep pace with companies like OpenAI. MicrosoftAnd Google In the rapidly evolving AI race.

Just last week, Social media giant launches its own AI assistant on its major platforms.

On Wednesday (April 24), Meta reports revenue growth of 27% And its profits doubled in the first quarter, but that didn’t ease investors’ fears as Zuckerberg continues his spending on AI. The intensive costs and computing power required to turn a profit in the new technology mean that spending forecasts for the year have risen from £35 billion to $40 billion.

This headline resourcing will boost investment in the development of AI infrastructure, including data centers and research costs. Billions have already been spent on GPUs, chips that meet the complex demands of powering AI systems.

Extra caution was urged as second-quarter revenue fell short of analysts’ expectations, adding to investor concerns as the stock price fell in after-hours trading. Meta shares were down 11% to $493.50.

“We should invest significantly more in the coming years to build even more advanced models and the largest-scale AI services in the world,” an enthusiastic Zuckerberg told analysts Meta. As part of this approach, he believes spending will need to increase meaningfully “before we can earn much revenue from some of these new products.”

Meta plans to capitalize on AI

It appears the CEO was aware of investors’ fears over increased expenses and falling share prices as he pointed to Meta’s “strong track record” of monetization. To balance spending commitments, the company is looking to gain benefits through AI advancements in its existing services.

Zuckerberg considered advances in business messaging, introducing advertising for AI chatbot interactions, and increasing group fees for use of his larger AI programs. He also vowed to oversee the development of wearable devices such as smart glasses with embedded AI assistants, as well as long-term ambitions to deliver an avatar-filled metaverse.

These targets will be hit by sharp losses made by Reality Labs, Meta’s virtual and hardware arm, which reported losses of approximately $3.8 billion in the first quarter, on revenue of $440 million.

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