Meta to launch Cloud business to monetize excess AI computing power

Meta is building a cloud business to sell excess artificial intelligence computing capacity.

The decision comes as tech giants seek returns on costly AI investments amid worries about overspending.

As the Bloomberg News reported on Wednesday, the plans are still in development and the strategy ‌could change.

Meta shares rose more than 10%, easing pressure on a stock that has underperformed the S&P 500 this year with a nearly 15% decline as of Tuesday.

Neocloud companies CoreWeave and Nebius fell 10.8% and 12.4%, respectively, on concerns the move could reduce spending on their services by Meta, a key customer, while adding to competition.

Competing directly with top cloud providers Amazon, Microsoft and Alphabet could help Meta tap booming demand for AI services from businesses, while reducing its reliance on the advertising market.

But analysts said it also deepened doubts about the social media giant's efforts to catch up with leading AI labs such as Anthropic, an effort that CEO Mark Zuckerberg has backed with billions of dollars in investment, including setting off a talent war last year.

Model developers, including Meta, have been racing to secure computing power since OpenAI kickstarted the AI boom with the launch of its ChatGPT chatbot in 2022, and demand far outpaces supply.

Meta told investors in April that it plans to spend as much as $145 billion on capex this year as it continues developing data centers and securing the graphics processing units needed to train AI models and run large workloads.

By standing up a cloud business, Meta could generate revenue on the capacity it’s not using, a welcome signal for some investors who have been uneasy about the company’s spending plans. 

Moreover, analysts suggests new business would also help Meta grow into a new and fiercely competitive market, which is dominated by companies including Amazon, Microsoft, Google and CoreWeave, among others.