Meta’s cloud business launch system makes it easy to accumulate massive amounts of stock
Meta Platforms on Wednesday gave investors what they needed to find renewed confidence in the company’s rising artificial intelligence spending — and its stock. Meta is preparing to launch a cloud infrastructure business that will sell more AI computing power and AI models to foreign customers, Jim Cramer confirmed Wednesday, throwing a ring in the cloud market to compete with hyperscaler titans like Amazon Web Services, Alphabet’s Google Cloud and Microsoft’s Azure. Bloomberg News first reported on Meta’s plans. Shares of the parent of Facebook and Instagram rose more than 9% on Wednesday to $617 per share, among the top gainers in the S&P 500. The positive reaction is hardly surprising — Jim recently stepped up his calls for Meta to start a cloud business, predicting that the struggling stock will rise in response. “Until today, our feelings were, what is Meta doing?” Jim said Wednesday on CNBC. Now, he added, “they’re going to use that [compute] the ability to deliver profitable business to their customers.” Meta shares entered Wednesday down about 7% for the year, trailing both the S & P 500 and the tech-heavy Nasdaq Composite, which rose 9.55% and 12.4%, respectively. enterprise software” narrative. Shares of Amazon and Google, two other cloud giants, rose 5% and 14.6%, respectively. Meta has faced growing questions about its monetization plan with its large levels of spending on servers, data centers and network infrastructure. In the past, Meta has defended its investment in AI and started doing Instagram business by improving Facebook. significantly restricting the free cash flow of Meta, which has reached levels that make some investors uncomfortable considering its small source of income and critical economy, Meta’s capex reached $ 37.2 billion, before rising to $ 69.6 billion this year, to $ 135 billion in April $ 190 billion in capex this calendar year, the main difference is Microsoft has a cloud business that will work on Google’s $180 billion to $190 billion in 2026 capex, and Amazon’s guidance of $200 billion. Worrying in the market and improving the attitude towards the stock even before the income starts to enter its fund, Meta will no longer be one trick pony, this new effort of cloud computing has shown that it is a very profitable business for other companies. With the stock still suffering in recent weeks, Jim argued that Meta needs to start moving in that direction. In this week’s Sunday column, he wrote: [computing] power, but by whom? We don’t know. Maybe its an advertising model? That’s ugh, and that’s why its stock is down. A consistent statement from Zuckerberg right now, saying, “We’re not going to spend this money on a data center and destroy our balance sheet,” or, even better, “We’re going to make money by building a web services system,” — either will take the stock out of the doldrums, making it an exciting investment still. To be sure, questions remain about Meta’s plan to sell access to computing power. For Meta to compete successfully in cloud computing, it will need more than just having AI data centers, according to tech analysts The Investing Club interviewed ahead of a Bloomberg report Wednesday morning. Technology industry analyst Ben Bajarin said investors should distinguish between two very different types of computer businesses. Another is leasing AI infrastructure, which it calls “bare metal” computing. In this case, customers will bring their own software and run it on Meta hardware. One is building a full-service cloud platform full of software, developer tools and business services such as AWS, Microsoft Azure and Google Cloud. “The question is, are they giving the infrastructure to third parties, or are they trying to put software on top of that,” said Bajarin, chief executive officer and principal analyst at Creative Strategies, a Silicon Valley research firm that focuses on the technology industry. He also co-hosts the podcast “The Circuit”, which covers semiconductors and the field of AI computing. A Bloomberg report suggests that Meta is exploring both options. One proposal will be similar to AWS Bedrock, by allowing developers to access AI models hosted on the Meta infrastructure, while the other will involve selling raw computing capacity similar to neocloud providers such as CoreWeave or, more recently, SpaceX. Elon Musk’s rocket-and-AI company last month struck a deal with Google in which Google will pay $920 million a month for more computing power. SpaceX, built a large data center near Memphis, Tennessee, and the same agreement with Anthropic. Bajarin said the timeline for when Meta’s cloud business becomes visible depends on how ambitious its cloud plans are. If a company leases redundant AI infrastructure, the offering can come quickly because customers will provide their own software. On the other hand, building a fully-fledged cloud platform like AWS or Google Cloud will take much longer. That’s because he said building a cloud business to serve external customers is more difficult than building data centers for internal workloads. Bajarin said it needs software that allows customers to put workloads on its own infrastructure, an area where established cloud providers have spent years investing. Paul Meeks, head of technology research at Freedom Capital Markets, said Meta’s investment-grade balance sheet gives it a significant edge over new AI infrastructure providers that rely heavily on debt to fund expansion. What Meeks questions, however, is whether AI companies would want to handle critical workloads on a competitor’s infrastructure that also builds its own AI models and systems. He pointed out how AI labs like OpenAI and Anthropic might think: “If Meta has a product that competes with us, then people will hesitate to buy their cloud services,” said Meeks, whose experts have been covered for decades. At the same time, Bajarin argued that demand for AI computing remains so strong that customers “will take computing wherever they can get it,” which would work if Meta took a bare metal approach. And in pursuing a full-fledged cloud service, Meta has relationships with tons of businesses using Instagram, Facebook and WhatsApp – something we believe sets them up as potential cloud customers. Bottom Line We are pleased that Meta is taking steps to explore ways to sell its AI infrastructure and show Wall Street that it is sensitive to investor concerns. At the same time, larger questions remain about how ambitious the company is – whether it wants to be just another supplier in a hungry computing market or if it’s building a full-service cloud platform. Either way, the move is another welcome step in Meta’s efforts to turn its massive AI investment into long-term returns for investors. (Jim Cramer’s Charitable Trust is long META, AMZN, GOOGL. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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