Mark Zuckerberg appears surprised by Meta's rapid spending on AI.

• Mark Zuckerberg, CEO of Meta, was taken aback by the rapid expansion of the company's data center and AI computing infrastructure.
• Meta increased its capital expenditures guidance for 2024 from $37 billion to $38 billion.
• The stock slid after hours even though the company reported better-than-expected third-quarter results.

Mark Zuckerberg, CEO of Facebook, is surprised by how quickly the company has built out its data center and computing infrastructure for artificial intelligence projects.

Zuckerberg informed investors during a call with analysts on Wednesday that Meta's increasing costs for the year are linked to the speed at which employees are able to set up data centers, servers, and chips for AI.

Zuckerberg stated that at the beginning of the year, we had a range of what we thought we could potentially achieve, but we've been able to accomplish more than we hoped and expected.

Meta has increased its capital expenditures guidance for 2024 from $37 billion to $38 billion, indicating that investors will have to prepare for higher expenses. The top end of the range remains at $40 billion.

"Zuckerberg expressed his happiness with the team's execution, stating that it makes him more optimistic about their ability to continue building at a good pace."

In 2025, the expenditures on Nvidia's graphics processing units, which amount to billions of dollars, will increase significantly.

Despite beating on earnings and revenue, Meta's shares dipped in extended trading on Wednesday due to weaker-than-expected user growth and rising costs.

During the earnings call, Ross Sandler from Barclays inquired about the timeline for Meta to construct the extensive computing infrastructure required to achieve its objectives related to generative AI, considering potential obstacles such as energy demands and the need to create custom AI-specific chips.

Zuckerberg praised Meta's infrastructure team for their excellent performance in expanding computing capacity for AI projects, including the Llama family of large language models.

Tech giants like Meta and are spending excessively on infrastructure without immediate returns, causing Wall Street concern. Zuckerberg acknowledged this issue in an interview with Bloomberg in July, stating that companies may be "overbuilding now." Despite this, the risks of underinvesting are too high, he emphasized.

"Zuckerberg stated on Wednesday that investors may not want to hear about the formula for building infrastructure in the short term, as Facebook is growing. However, he emphasized that the opportunities are significant and that the company will continue to invest heavily in this area. He expressed pride in the teams working hard to establish a large amount of capacity to deliver top-notch models and products."

It's not the only place where investors have to stomach hefty expenses.

Meta's Reality Labs unit, which focuses on metaverse technologies, reported an operating loss of $4.4 billion in the third quarter. The company anticipates that its 2024 operating losses will increase significantly compared to the previous year as a result of its ongoing product development efforts and investments to expand its ecosystem.

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