Meta Is Finally Entering This High-Margin $500 Billion Market. Is the Stock a No-Brainer Buy?
Yahoo Finance ·
It's rare for a stock the size of Meta Platforms ( META +8.88% ) to jump 9% on non-earnings news, but that's exactly what happened on Wednesday, and for good reason. Bloomberg reported that the social media giant is launching its own cloud computing business . Though Meta hasn't made its own announcement about a new cloud infrastructure service, the news comes weeks after CEO Mark Zuckerberg said that a cloud business was "definitely on the table." The shockwaves from the news were felt throughout the tech sector as neocloud companies like CoreWeave and Nebius fell by double digits as Meta represents a huge new competitor, and chip stocks like Micron were down sharply as well, as investors interpreted the news as an increase in chip supply, which would hurt "bottleneck" plays like Micron, which have soared in recent months on the memory shortage. Additionally, it could signal a peak in the AI capex investment cycle. The service is still in development, but according to the report, Meta is planning on offering two primary services. The first is access to bare-metal computing capacity, essentially renting out its AI chips to companies willing to pay for them. This is CoreWeave's business model, and it's driven several quarters of triple-digit revenue growth, though CoreWeave has had to take on billions in debt to build out its data centers to meet demand, leading to losses.
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