Morgan Stanley sees smarter AI cloud path for Meta
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Morgan Stanley sees smarter AI cloud path for Meta Moz Farooque ACCA Mon, July 6, 2026 at 12:20 PM EDT 1 min read META AMZN MSFT GOOGL This article first appeared on GuruFocus . Meta Platforms ( NASDAQ:META ) may have a better AI-cloud opportunity in renting out excess compute than trying to become a full-scale hyperscaler, according to Morgan Stanley analyst Brian Nowak . Nowak believes Meta is more likely to build a neocloud business, focused on leasing GPU-powered AI capacity, rather than competing head-on with Amazon ( NASDAQ:AMZN ) Web Services, Microsoft ( NASDAQ:MSFT ) Azure, and Alphabet ( NASDAQ:GOOGL ) Google Cloud across the full cloud stack. He reiterated a Buy rating on Meta with a $775 price target , implying nearly 33% upside . Warning! GuruFocus has detected 2 Warning Sign with META. Is META fairly valued? Test your thesis with our free DCF calculator. The logic is simple: Meta already needs massive compute for its own AI products, but selling some excess capacity could generate high-margin revenue without the cost and complexity of building a broader cloud platform. Nowak estimates Meta could add around 2 gigawatts of incremental compute capacity in 2026 and up to 3.5 gigawatts in 2027. He expects Meta's capital spending to rise to $175 billion in 2027 and $205 billion in 2028 , up from $145 billion in 2025 . Even then, he sees the neocloud route as a cleaner return story, estimating that leasing 250 megawatts of compute at $40 per watt could add roughly 8% to Meta's 2028 annual earnings per share.
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