Meta building cloud business to sell excess AI capacity, Bloomberg News reports
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July 1 : Meta Platforms is building a cloud business to sell excess artificial intelligence computing capacity, Bloomberg News reported on Wednesday, as tech giants seek returns on costly AI investments amid worries about overspending.
The plans are still in development and the strategy could change, the report said, citing people familiar with the matter.
Meta shares rose more than 10 per cent, easing pressure on a stock that has underperformed the S&P 500 this year with a nearly 15 per cent decline as of Tuesday.
Neocloud companies CoreWeave and Nebius fell 10.8 per cent and 12.4 per cent, respectively, on concerns the move could reduce spending on their services by Meta, a key customer, while adding to competition.
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Competing directly with top cloud providers Amazon, Microsoft and Alphabet could help Meta tap booming demand for AI services from businesses, while reducing its reliance on the advertising market.
But analysts said it also deepened doubts about the social media giant's efforts to catch up with leading AI labs such as Anthropic, an effort that CEO Mark Zuckerberg has backed with billions of dollars in investment, including setting off a talent war last year.
Meta in April unveiled Muse Spark, the first AI model from a costly team it assembled, but one it is yet to release to developers. A Wall Street Journal report said last month that it has no scheduled date for the launch.
The cloud service Meta is now planning would let developers access AI models hosted on its infrastructure, including Muse Spark, and pay for the computing power needed to run them, Bloomberg News' Wednesday report said.
This would be similar to Amazon Web Services' Bedrock, which allows developers to access AI models from different companies.
The Instagram parent is also considering selling raw AI computing capacity like neoclouds, the report added.
"The impact of adding Meta’s capacity to the market is more likely to be on neoclouds than the big hyperscalers. Those companies like CoreWeave and Nebius rely on Meta for their growth and Meta may not need them anymore," said Gil Luria, managing director of D.A. Davidson.
Meta declined to comment. Reuters could not independently verify the report.
IN SEARCH OF RETURNS
"This is very similar to the situation SpaceX has found itself in, which led it to sell compute capacity as well," said Luria.
Elon Musk's SpaceX, whose xAI unit is also behind leading AI development efforts, recently struck deals to rent out access to its Memphis data centers to Anthropic and Google.
At Meta's shareholder meeting in May, Zuckerberg had said entering cloud computing was "definitely on the table," noting that firms were approaching Meta "almost every week" to buy access to its AI models or spare computing power.
Meta is projected to spend as much as $145 billion on AI infrastructure this year, a significant portion of Big Tech's more than $700 billion outlay on the technology.
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