Remember when your friend said they were going to spend their entire paycheck on crypto and you thought they’d lost their mind? Well, Meta just did something similar with AI spending, and somehow Wall Street is applauding like proud parents at a school play.
Here’s the tea: Meta dropped their Q4 earnings yesterday, and the numbers were spicier than expected. They pulled in $59.9 billion in revenue (versus the $58.4 billion everyone was betting on) and earned $8.88 per share when analysts were only expecting $8.16. Not bad for a company that’s basically trying to convince us all to live in virtual reality.
But here’s where it gets interesting – and by interesting, I mean “hold onto your portfolio” interesting. Meta announced they’re planning to spend between $115 billion and $135 billion on AI this year. That’s not a typo. They’re going from spending $72 billion last year to potentially almost doubling it. It’s like going from buying the occasional latte to purchasing the entire coffee shop.
Now, you’d think investors would be running for the hills faster than people fleeing a Facebook family reunion. After all, the last time Meta announced big spending plans, the stock took a nosedive that would make a cliff diver jealous. But this time? The stock jumped 9% and everyone’s acting like Mark Zuckerberg just discovered the secret to printing money.
So what changed? Two words: advertising revenue. Meta’s ad business is absolutely crushing it right now, generating enough cash to fund their AI dreams without having to borrow money like a college student before spring break. CFO Susan Li basically told everyone, “Don’t worry, we’re paying for this AI party with our own money, not credit cards.”
The advertising success isn’t just luck – it’s actually tied to their AI investments. Turns out, when you use artificial intelligence to figure out which ads to show people, those ads work better. Revolutionary concept, right? It’s like using a GPS instead of asking for directions at a gas station – you actually get where you’re going.
Wall Street analyst Dan Ives from Wedbush Securities basically said Meta is already seeing “tangible benefits” from their AI investments in their advertising business. Translation: the AI spending isn’t just expensive tech flexing – it’s actually making them more money.
This whole situation is a masterclass in how to spend ridiculous amounts of money and have people cheer you on. The key? Make sure you’re already making enough money from your current business to fund your expensive hobbies. It’s like being able to afford that sports car because your day job is going so well, not because you maxed out your credit cards.
Meta’s stock is now up 10% for the year, which in January terms is basically like being the valedictorian of a class that just started. But hey, in the world of tech stocks, sometimes getting off to a good start is half the battle.
The bottom line? Meta figured out how to make AI spending look responsible by making their core business so profitable that they can afford to play with the expensive toys. It’s a strategy that’s working so far – let’s see if they can keep the magic going.