Meta falls as massive AI infrastructure spending plans overshadow chip progress

Investing.com -- Meta Platforms (NASDAQ: META) shares declined 2.6% Thursday morning as the company’s ambitious plans to double its computing capacity reminded investors of the astronomical capital expenditures required to win the artificial intelligence race.

While the social media giant announced it will begin manufacturing its first in-house AI chip this September—a move intended to eventually lower computing costs—the sheer scale of the company’s near-term spending plans triggered immediate anxiety on Wall Street.

According to an internal memo reviewed by Reuters, Meta plans to start production on its data center chip, code-named "Iris," in September. The chip is part of a four-generation project for Meta Training and Inference Accelerators (MTIA) designed entirely in-house. Meta is working with Broadcom on the design and Taiwan Semiconductor Manufacturing Co. (TSMC) for fabrication, hoping to drastically reduce its dependence on expensive third-party suppliers like Nvidia and Advanced Micro Devices.

However, the cost of achieving that independence is staggering. The memo revealed that Meta plans to deploy seven gigawatts of computing infrastructure this year and double that capacity by 2027. To get there, the company expects to spend as much as $145 billion on AI infrastructure this year alone. This represents a massive chunk of Big Tech’s projected $700 billion industry-wide outlay, and it is this aggressive capital expenditure that weighed on the stock. Investors historically penalize tech giants when massive infrastructure bills threaten short-term margins before yielding clear revenue.

Adding to the financial pressure, Meta is locking in long-term supply agreements with Samsung Electronics, Sandisk, and Sumitomo Electric to secure the components needed for this expansion. Because every tech giant is rushing to build out data centers at the same time, prices for memory and AI chips are skyrocketing. Morgan Stanley analysts recently warned that this surge has triggered "chipflation," turning skyrocketing infrastructure costs into a broader macroeconomic concern that could further squeeze Meta’s bottom line in the quarters ahead.

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