Meta has announced that it has underestimated the cost of AI by at least $5 billion in capital expenditures. The company’s Q1 earnings report revealed this information, indicating that costs are expected to increase as the company continues to invest aggressively in AI.
In addition to higher infrastructure and legal costs, product development is also contributing to the increase in expenses. 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.
Meta is now upping its estimate of capital expenses and anticipates that the increase will 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 increased investments.