Meta’s Q1 earnings report has revealed that the company underestimated the cost of AI by at least $5 billion in capital expenditures. This news comes as Meta is investing aggressively in AI, with higher infrastructure and legal costs also contributing to the increase in expenses.
Meta has adjusted its estimate of capital expenses and expects the increase to continue as it invests in AI research and product development efforts. The new expenses are projected to be around $35 to $40 billion, compared to the original estimate of $30 to $37 billion. Additionally, Meta’s minimum estimate for full-year 2024 total expenses will be $2 billion higher than expected due to these additional costs.
The rise in costs is not just due to AI investments but also stems from product development and legal costs. Meta is currently facing legal issues, including an antitrust lawsuit and accusations from 33 states regarding the impact on children’s mental health. The company also predicts significant increases in operating losses for Reality Labs due to ongoing product development efforts and ecosystem scaling.
Max Willens, a senior analyst at Emarketer, noted that the adjustment in guidance from Meta was not surprising given the significant investments in the AI space. Companies like Meta, investing at such a large scale, may face challenges with costs in the short term. However, this change reflects Meta’s commitment to advancing its AI capabilities despite the financial implications.
Overall, Meta’s increased investment in AI is driving up costs for the company significantly. While this may present short-term challenges for Meta’s bottom line, it shows their long-term commitment to innovation and leadership in this exciting field of technology.
