Meta shines despite heavy AI investments, while competitors falter

The latest financial reports from major tech corporations have revealed a remarkable development in the field of Artificial Intelligence (AI). While Wall Street generally welcomes the substantial expenditures on AI technologies by the big tech companies, there is an important condition: the rest of the business must operate smoothly. Meta stood out positively in this context. CEO Mark Zuckerberg, who has fully embraced his post-metaverse era, demonstrated that investors do not necessarily shy away from massive investments with uncertain futures. According to CFO Susan Li, infrastructure costs are expected to rise significantly next year, but this scarcely bothered Wall Street. Meta's impressive financial results were convincing: revenue grew by 22% in the second quarter, and income surged by a substantial 58%. Despite losses amounting to $4.5 billion in the Reality Labs segment, this item fell to 31% of the total earnings share. Zuckerberg explained to analysts that the strong core products and solid business operations allow for deep investments in the future. Contrarily, the competition revealed the downside of this dynamic. Alphabet, Microsoft, and Amazon presented mixed results, highlighting that AI investments can become burdensome if the central business areas falter. Amazon concluded with weaker revenue and profit forecasts, while Microsoft, despite good results, missed its cloud targets, and Alphabet's YouTube ad revenue fell short of expectations. The key difference: Meta excelled in the basics, making its substantial investments appear ambitious, whereas similar expenditures by its competitors are considered risky. Alphabet CEO Sundar Pichai views AI expenditures as a necessary, long-term venture, arguing that underinvestment could pose a greater risk. However, investor skepticism toward bold AI plans is growing. Facebook's Metaverse odyssey from a few years ago, which caused the stock to plummet over 60% in 2022, serves as a cautionary tale. For some analysts, the current AI enthusiasm is comparable to the Metaverse project, which incurred significant costs and drastically lowered the stock price. Nonetheless, not everyone shares this view. Wedbush analysts see the current AI development as a decisive turning point rather than a repeat of past mistakes. Zuckerberg appears to have learned from the past and is now banking on a promising future with a strong advertising-machine foundation. Wall Street is sending the message that while bold AI plans are welcome, investors still want to see solid financial results as proof.