The news: When it comes to AI investment, Google CEO Sundar Pichai’s mantra that the risk is underspending, not overspending, seems to be holding true at Meta. It forecast roughly $600 billion on AI-related capital expenditure over the next three years, but investors are questioning whether that philosophy has limits.

Market anxieties about an AI bubble are mounting, and not every player is equally equipped for a spending spree.

Zooming out: Meta is one of the most aggressive spenders of the Big Tech bunch, but its massive investment—coupled with CEO Mark Zuckerberg’s vague promises of “novel models” and “new things”—has rattled investors.

• Despite a strong Q3 earnings report with revenues up 26% YoY to $51.2 billion, Meta’s stock has dropped 15.2% since it released its report Wednesday.
• Aside from incremental gains from features like its Vibes feed, Meta still lacks a defining AI product to justify spending without relying on ad revenues.

Meanwhile, Microsoft’s stock dropped just 4.5% since its Wednesday earnings report. It may be better positioned to balance its cash flow and capex than Meta and Amazon, which are stretching and outspending to keep pace.

Microsoft will spend about 49% of expected cash from operations this year on capex, per The Information. Google will spend about 58%, Meta about 65%, and Amazon 88%. While Meta’s spending is only marginally higher than Microsoft and Google this year, its long-term capex plan shows no sign of slowing and is much larger than others.

What it means for Meta: Meta isn’t the only Big Tech player diving deep into AI infrastructure spending. However, if markets start demanding proof of payoff, that could cool the pace of AI tool development and tactic of funding compute for compute’s sake.

Implications for platform users: Meta’s heavy focus on AI could aid its ad offerings, especially personalization options and its AI-powered ad suite. At the same time, overspending could lead to uneven focus that leaves other ventures—including its cash-burning Reality Labs and plateauing interest in Facebook—vulnerable.

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