Meta’s New Chip Underlines Questions About AI Spending

Mark Zuckerberg seems to enjoy stealing Sundar Pichai’s thunder. Close observers of the cloud sector will know that Google Cloud has one of its big annual events in Las Vegas this week, and it’s rolling out lots of announcements, including a new custom-designed chip for cloud computing. It seems Meta Platforms couldn’t resist getting in on the action, announcing today its first internally designed chip for running artificial intelligence models, as part of a new “AI-optimized data center design.” You can just imagine the folks at Google Cloud grumbling that given there are 52 weeks in the year, Meta could have picked another time to make this splash.

It must particularly pain the Google folks that this happened even as investors have fallen in love with Meta all over again while barely giving Google the time of day. Google stock has rallied a tiny bit in recent days, but it’s still trading at a big discount to Meta on a forward sales multiple, according to Koyfin. And the puzzle is why. OK, so Meta’s ad business has rallied more robustly than Google’s lately. But given Google’s cloud business and deep resources in AI, it has to be well positioned to benefit from the revolutionary tech over the long term. Meanwhile, Meta is pouring billions into AI without a clear path to earn a return. For all those investors questioning the returns companies will get from their AI investments, Meta should be Exhibit A.