Meta Platforms Inc (META: NSD) has been on a tear in the past year, with its stock price soaring over 90%. However, the company’s recent decision to offer its latest artificial intelligence (AI) models for free has cast a shadow on its future earnings potential, causing some investors to hit the brakes.
Aggressive Investment in AI:
Meta has been pouring significant resources into developing cutting-edge AI technology. This investment is driven by CEO Mark Zuckerberg’s vision of a future where AI plays a central role in Meta’s various products and services, from social media platforms like Facebook and Instagram to the development of the metaverse.
Giving Away the Crown Jewels?
In April 2024, Meta released Llama 3, its most advanced AI model to date, completely free of charge. This move surprised many analysts and investors. While open sourcing some AI tools is not uncommon, giving away a potentially lucrative technology like Llama 3 raised concerns about Meta’s long-term monetization strategy for its AI efforts.
Investors worry that by not charging for its AI models, Meta is essentially giving away its crown jewels. They fear that this could lead to a decline in short-term profits and hinder the company’s ability to generate revenue from its substantial AI investments.
Stock Performance Takes a Hit:
Since the release of Llama 3, Meta’s stock price has declined by roughly 5.6%. This underperformance is particularly noteworthy when compared to the broader market, with the Nasdaq 100 (NDX) and S&P 500 (SPX) gaining 4.7% and 5% respectively during the same period.
Conclusion:
While some investors are spooked by Meta’s free AI strategy, others see it as a long-term play. By making its AI models readily available, Meta could foster innovation and collaboration within the AI research community. This, in turn, could lead to faster development and wider adoption of AI technology, ultimately benefiting Meta in the long run.
Muzzammil is a content writer at Stock Target Advisor. He has been writing stock news and analysis at Stock Target Advisor since 2023 and has worked in the financial domain in various roles since 2020. He has previously worked on an equity research firm that analyzed companies listed on the stock markets in the U.S. and Canada and performed fundamental and qualitative analyses of management strength, business strategy, and product/services forecast as indicated by major brokers covering the stock.
