Investors may be generally tracking the artificial intelligence wars (AI), with most of the "Magnificent Seven" companies spending hand over fist in a race to be the first to crack AI -- and all the financial benefits that come with it.
But over the last couple of weeks, Meta Platforms (META 0.37%) CEO Mark Zuckerberg has made truly massive moves, committing huge amounts of dollars to both talent and computing infrastructure that dwarf even the current super-expensive standard of today's AI leaders.
The implications of the moves may have been comprehended by some, but may still be underestimated by the larger investment community.
Zuck throws down the gauntlet
Over the past month or so, Zuckerberg has:
- Purchased 49% of data-labeling leader Scale AI at a $28 billion valuation, bringing in Scale's CEO Alexandr Wang and top leadership.
- Hired top AI talent in addition to Wang to create a "Super-Intelligence Team" from several leading AI and tech rivals, totaling about 50 researchers, by offering multiples more than other companies, with some offers rumored to be as much as $200 million or more.
- Notable poached talent includes Nat Friedman, the former GitHub CEO; Daniel Gross, who was CEO and co-founder of SSI, Ilya Sustkever's current start-up (Sustkever was a co-founder of OpenAI); Ruoming Pang, the head of Apple's AI division; as well as Lucas Beyer, Alexander Kolesnikov, and Xiaohua Zhai from OpenAI.
On infrastructure investments, Zuckerberg also shed light on massive upcoming projects:
- In a Threads post, Zuckerberg said Meta was going to invest "hundreds of billions of dollars" in AI superclusters.
- This includes the industry's first 1GW supercluster, which Meta is calling Prometheus and should come online in 2026.
- Zuckerberg also said this will be just the first of multiple GW-plus superclusters, including Hyperion, which will eventually scale up to 5 GW over several years, and encompass a data center almost the size of Manhattan.
Image source: Getty Images.
How does all this spending pay off?
One might wonder what spurred this spending binge from Zuckerberg, and whether it was an offensive or defensive move. The answer, perhaps not surprisingly, is likely both.
Zuckerberg now says Meta is aiming for "super intelligence," which could be somewhat akin to what was formerly referred to as artificial general intelligence (AGI). The concept of super intelligence, and whether AI is capable of reaching such a thing, has been hotly debated. However, it appears that Zuckerberg now believes super intelligence is achievable, and may be reached within the next few years.
In a recent interview with tech magazine The Information, Zuckerberg said:
There is this big debate in the industry today. All right, is super intelligence going to be possible in three years, five years, seven years? But I don't think anyone knows the answer. I just think that we should bet and act as if it's going to be ready in the next two to three years.
Zuckerberg also believes "super intelligence" may mean different things to Meta than it does to more enterprise-oriented Mag Seven companies. Whereas, say, Microsoft might use AI to automate many enterprise functions, leading to an increase in productivity, for Meta, Zuckerberg apparently has a vision of giving consumers "super intelligence" related to their everyday lives, the media they consume, and their social connections.
Zuckerberg also made an interesting note in the interview that the high salaries are worth it, since the ultimate team will likely be small, between 50 and 70 people:
I think that the physics of this is, you don't need a massive team to do this. You actually kind of want the smallest group of people who can fit the whole thing in their head. So there's just an absolute premium for the best and most talented people.
This makes sense. The architecting of AI systems is very complex, and if a technician makes a wrong architectural choice along the way, that can affect the performance of the entire model. According to AI chip blog Semianalysis, Meta's recent large language model Llama 4 has been a disappointment, and the reasons were partly due to poor data labeling -- which the Scale AI acquisition should help with -- and a few poor architectural choices.
Thus, it's perhaps no surprise that Zuckerberg feels investing in a smaller number of high-caliber engineers is the best path. The difference between a winning model and a disappointing model may come down to a few high-level decisions, so it makes sense that Zuckerberg would pay up for quality over quantity for Meta's new AI efforts.
Another offensive aspect of this is that Meta has arguably more financial resources than its rivals, especially OpenAI, which is considered a start-up and losing tens of billions at the moment. Last year, Meta's "core" social media advertising business brought in a whopping $87.1 billion in operating income, somewhat offset by a $17.7 billion loss in its Reality Labs division. And that $87 billion is probably on track to reach close to $100 billion this year.
Therefore, Meta has the ability to pay as much or more than its rivals, and by paying these types of astronomical salaries, it's raising the costs of employment for everybody -- OpenAI included. Zuckerberg continued:
... one of the benefits of reinforcement learning is it gives you a venue to, you know, potentially convert very large amounts of capital into a better and better service, and potentially a better service than other less well-funded or less bold competitors will be able to do so... I view that as a competitive advantage. If we can get this to work well, and that's why we are basically all in on this. We're building, you know, we're building multiple, multi-gigawatt data centers, and we can basically do this all funded from the cash flow of the company.
But the move may also be defensive, and isn't without risks
While the "all-in" spending binge from Zuckerberg is exciting, investors should also be wary of a few things. First, it appears Meta's AI super intelligence dream team will be essentially starting from scratch. This is likely due to Meta's recent efforts on its Llama 4 LLM coming up short of expectations, or at least falling further behind its other competitors than Zuckerberg would like. So, it appears Meta's latest attempt at leading AI is a bit of a bust, raising questions about the need to put all its chips into the pot, so to speak, at this moment.
It has also been reported that Zuckerberg wasn't able to successfully acquire all the companies and talent that he wanted. In addition to Scale AI, Zuckerberg reportedly also wanted to acquire Mira Murati's Thinking Machines and Ilya Sustkever's SSI, but was rebuffed in both cases. It was also reported Zuckerberg extended billion-dollar offers to some of OpenAI's leadership team, but was also rebuffed. So, while Meta now has perhaps the most formidable AI "dream team" around, it isn't a "full" dream team necessarily.
Finally, Meta has a history of throwing money at certain far-off ventures, without immediate tangible outcomes. Look no further than the Reality Labs segment, which is basically Zuckerberg's gambit to create the "next computing platform" of virtual reality goggles or glasses. Meta even changed its name from Facebook to Meta Platforms in 2021 to show its commitment to the effort. However, in 2024, three years later, that segment lost $17.7 billion, up from a $16.1 billion loss in 2023.
Finally, Zuckerberg didn't really spell out what he exactly meant by an everyday consumer "super intelligence." While both the Reality Labs division and the concept of consumer super-intelligence may one day come to fruition, it's not assured -- even with Zuckerberg assembling an AI "dream team." So while this past month's spending is exciting, look for investors to get impatient if Meta's spending goes up without a corresponding growth in revenue.
And yet, the spending makes Meta a must-own stock
If one of today's current tech leaders reaches "super intelligence" before the others, it has the potential to disrupt the balance of power among today's Magnificent Seven. That's why any young person or growth investor should have exposure to Meta and its rivals, in spite of their massive AI spending today.
If and when one of these companies "cracks the code" before others, it's possible the Magnificent Seven could become the Magnificent Three, Two... or even One. With his moves over the past month, Zuckerberg is investing heavily to make sure Meta is one of the leading candidates to become that "one."
Investors should keep their ears out for more information when Meta reports earnings at the end of the month on July 30.
