Meta is reportedly exploring options to enter the cloud computing market to offload excess artificial intelligence infrastructure, according to Bloomberg. The company is considering several strategies, including selling access to AI models hosted on its existing hardware, similar to Amazon Web Services' Bedrock, or offering raw compute power directly to other companies.
This move comes as Meta, like many major tech players, has significantly invested in AI infrastructure, leading to increased capital expenditures projected to exceed $140 billion for the full year. The company's shares saw a notable jump of 9.3% following reports of these considerations, suggesting investor optimism about potential returns on AI investments.
During Meta's annual shareholder meeting in May, CEO Mark Zuckerberg acknowledged that moving into the cloud business was "definitely on the table." He noted that there has been demand from other companies for "stand up an API service" or to purchase compute power from Meta. Zuckerberg also stated that the company has a use for its current compute capacity but would consider selling it if it determined it had overbuilt. This strategic flexibility reportedly provides confidence in continued investment.
However, some analysts question the long-term viability and benefit of this strategy for Meta. Damir Tokic of Seeking Alpha argues that Meta's core revenue relies heavily on advertising, which the AI infrastructure was initially built to support. If Meta shifts to renting out its capacity, it might need to reduce or halt further AI investment in datacenters, especially if it already possesses excess capacity. Furthermore, continuing capital expenditure might necessitate increasing debt, with operating cash flows already showing a decrease.
Meta is not alone in exploring such avenues. SpaceX, for instance, acquired Elon Musk's xAI and has begun renting out its excess compute capacity to Anthropic. This trend suggests a potential oversupply in the AI infrastructure market, a scenario that could lead to increased competition and decreased viability for compute-rental services if more companies realize they have overinvested.