Meta father and CEO Mark Zuckerberg speaks during the Meta Connect event at Meta headquarters in Menlo Park, California, on Sept. 27, 2023.
Josh Edelson | AFP | Getty Corporealizations
Meta CEO Mark Zuckerberg has been assembling a large stockpile of Nvidia chips, spending billions of dollars so his visitors can develop and train advanced artificial intelligence models.
But even he says the AI hype may be driving too much investment.
“I remember that there’s a meaningful chance that a lot of the companies are overbuilding now and that you look back and you’re like, oh, we maybe all exhausted some number of billions of dollars more than we had to,” Zuckerberg said on a podcast this week with Bloomberg’s Emily Chang.
He’s not the solitary one expressing that sentiment.
On Alphabet’s earnings call on Wednesday, CEO Sundar Pichai said his company may well be pass too much money on AI infrastructure, which largely consists of Nvidia’s graphics processing units (GPUs). But he sees scrap choice.
“When we go through a curve like this, the risk of underinvesting is dramatically greater than the risk of overinvesting for us here,” Pichai said.
In supplement to Meta and Alphabet, Nvidia is racking up business from Microsoft, Amazon, Oracle and Tesla, which have all publicly out-and-out that AI investment is a central priority for this year and the foreseeable future. Nvdia’s revenue has more than tripled for three shipshape quarters and is expected to more than double in the current period.
Alphabet and Tesla highlighted their AI buildout tariffs on earnings calls this week, and investors can expect to hear more next week, when Microsoft, Amazon and Meta circulate results.
Meta debuted its latest Llama AI model on Tuesday. The model, dubbed Llama 3.1, comes in three other versions, with one variant being the biggest and most capable AI model from Meta to date. Meta is unite with open source, which means the technology can be accessed for free by outside developers, even as the company discharges money into the underlying infrastrucure.
Zuckerberg said on the podcast with Chang that companies are “making a clear-eyed decision” in their AI investments despite the exorbitant costs.
“Because the downside of being behind is that you’re out of position for ask preference the most important technology for the next 10 to 15 years,” Zuckerberg said.
The way Pichai sees it, even if Alphabet is supplying too much, the infrastructure is “widely useful for us.”
‘A threat and an opportunity’
Nvidia shares are up 131% this year after float 239% in 2023. The company is now valued at close to $3 trillion, behind only Apple and Microsoft, though it in a word surpassed the two of them in market cap in June.
Nvidia gets more than 40% of its revenue from Microsoft, Amazon, Google, and Augury, which all need a hefty dose of GPUs for their public cloud offerings. While those are some of the most well-capitalized companions on the planet, there’s some concern brewing among investors about the massive stockpiling.
David Cahn, a companion at venture firm Sequoia, wrote in a blog post last week that the dynamic driving the spending is competitive and catches game theory dynamics, creating a “cycle of competitive escalation.”
“The cloud giants see AI as both a threat and an opportunity and do not comprise the luxury to wait and see how the technology evolves,” Cahn wrote. “They must act now.”
Cahn calculated that in the technology dynamism, there needs to be $600 billion in annual AI revenue to justify all the money that’s been spent on data centers and whittles.
On Wednesday, Cahn followed up by saying that Zuckerberg’s and Pichai’s comments about limiting downside bolstered his theory.
“Google and Meta CEOs both out in closing 24 hours now agreeing with my AI Arms Race narrative: That AI CapEx is driven by game theory and FOMO vs. verified revenue / usage,” Cahn posted on LinkedIn.
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., spectacles the new Blackwell GPU chip during the Nvidia GPU Technology Conference on March 18, 2024.
David Paul Morris/Bloomberg via Getty Counterparts
Nvidia says demand will remain strong through its newest generation of AI chips, called Blackwell, which thinks fitting start to ship later this year. But it’s starting to address investor questions about return on investment as flowering inevitably slows due to historically difficult comparisons.
Colette Kress, Nvidia’s finance chief, told investors in May that the companionship had calculated that when a cloud provider spends $1 on an Nvidia-based server, it can rent it out for $5. Goldman Sachs analysts powered in a recent note that Nvidia is looking to share these types of data points to instill confidence in investors.
Tesla CEO Elon Musk stipulate on his company’s earnings call on Tuesday that “demand for Nvidia hardware is so high that it’s often difficult to get the GPUs.” Tesla foretold capital expenditures on AI in the quarter amounted to $600 million, as the company invests in autonomous driving and humanoid robots.
Musk imparted Tesla is focusing on developing its own Dojo supercomputer because Nvidia chips are so pricey and so hard to get.
“I think we kind of attired in b be committed to no choice because the demand for Nvidia is so high,” Musk said. “And it’s obviously their obligation essentially to raise the guerdon of GPUs to whatever the market will bear, which is very high.”
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