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Meta (META) posted better-than-expected first quarter results on Wednesday. The tech giant also announced it was boosting its spending to advance its AI push. Big Tech's big AI spending has some on Wall Street concerned, but investors seem to be cheering Meta's move. Wedbush Securities managing director Scott Devitt explains why in the video above.
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One of the surprises we've been talking about in the meta numbers as well is the idea that it raised its CAPEX forecast for the full year to 64 to 72 billion dollars. That again was a bit of a surprise here. What do you think is driving that? What do you think gives meta the comfort to be able to do that?
So there's two topics here. One is, as you describe, the comfort. So that means the company has confidence in the strength of the business and is comfortable continuing to spend. So that's a positive. The other thing is that investors are distinguishing between companies that are spending CAPEX from an offensive standpoint versus defensive standpoint. Because some look at what alphabet's doing and think that's more defensive to keep up with the risk related to AI and its search business. And investors tend to look at meta's increases in CAPEX as being favorable because they're well positioned in terms of AI. I don't know if that's the right answer or not. That's the way investors tend to look at it. And so this raise from a CAPEX standpoint, it comforts investors in both of those areas in terms of the aggressiveness of the management team to be front-footed spending and also in terms of the comfort that they can attain their revenue expectations for 2025.
Scott, some of your colleagues on the street, I know, they're very excited, Scott, about llama. This is meta's open-source large language model. I'm curious whether you share in that excitement.
Maybe a little less enthused than some others. You know, there's a lot of models out there. And um and I've heard you know, more favorable feedback from some of the competitor platforms. But um but you know, we'll have to, it's early days and open source particularly is super early. So I think meta will be well positioned whether it's LLM, you know, leads, or it's LLM is used to add intelligence to its own platform. Either way, you know, I think the company can win. But um llama itself, I think there's a few others that have an advantage.
What do you think about the decision of the company to sort of offer it as a separate app? Do you think that's going to be, you know, because now people use it but it's not like they're opting in, right? It's just sort of built into the product. So now that it does, you know, I guess they're doing both. It's not or. But do you think there will be that significant sort of opting in and usage of that separate app?
I think that companies like meta and like alphabet that have massive global scale, effectively every internet user uses the product already, is benefited by bundling services into the core. And so I would anticipate whether there is an individual separate offering over time that stands on its own, the vast majority of usage and success or failure of it is going to be based on how it's integrated into the core platform. And that's, you know, unique for their business relative to the startups that have nothing to leverage, um but are gaining traction because the products are so good. Uh but that's just the way, you know, strategically that it makes the most sense for a company like meta.
