What Is META Doing?
AI, Fiscal & Monetary Policy and more
Zuckerberg is betting META future on becoming the AI leader. This path won’t leave META’s Balance Sheet with sufficient dry powder for other strategic initiatives, or to capitalize when the inevitable AI winter arrives.
I love the frontier LLMs, but they are tools, not magic. The primary use cases I am involved with - automating portions of code writing - don’t deliver the ROI I captured when I moved from running calculations by hand to running them on a calculator. Unlike a calculator or spreadsheet, LLMs are often wrong. They spit out bad responses, they write incorrect code, they hallucinate. LLMs make fewer mistakes today than previous model iterations, yet ROI still suffers greatly when as the user you know the model made a mistake(s) in your code or your research paper draft, but you don’t know where the model made the mistakes. Therefore, you must review 100% of the model’s output to find the errors.
This brings me to META META 0.00%↑ . What is META doing in AI? It scrapped its open source LLM initiative (Llama), which I was a fan of, in favor of building a proprietary LLM family. Building a leading LLM will be a tough task even if everything goes smoothly. Yet META has experienced significant AI leadership turnover, which makes the job at hand more difficult. The real problem is that LLMs are not at META’s cultural core. META will never catch Google GOOGL 0.00%↑ , OpenAI nor Anthropic unless it acquires OpenAI or Anthropic.
META is messing up its balance sheet in the pursuit of AI and has nothing to show for it. I am not buying the corporate line that AI has helped drive META’s topline. I believe bots are buying Ads on META’s behalf. If 10% of META’s traffic is bot-related, my guess is that 10% of META’s Revenues are bogus.
META would be better off moving to acquire a leading LLM such as Anthropic or OpenAI - both of which require financial assistance. Given the amount of capital META is spending, the company won’t have any dry powder for acquisitions when AI winter arrives.
META has a net debt position of $22 billion or $44 billion depending on whether you want to consolidate the $27 billion Blue Owl deal and allocate 100% of the debt to META given it has operating control of the JV.
