00:00 Speaker A
Meta making news, right? Reports that maybe Zuck is is going to enter the cloud biz. What do you make of that headline, Gil? What do you make of the stock reaction?
00:10 Gil
Anything they do differently than what they’ve been doing is good for the stock, right? The the core ad selling business is doing so well, and you know, the stock has languished because they’re spending at an even faster rate.
00:23 Gil
So, anything that indicates that Mark Zuckerberg is going to spend less money on CapX, less money on AI investment is great for the stock.
00:36 Gil
Because again, that core business is doing phenomenally well, growing in the 20s from a very large base. If they can just moderate the growth on CAPEX, that’d be great for the stock. And and if they’re trying to sell compute, that is a very good indication they are going to moderate on CAPEX and moderate on that external spend on other cloud providers where they’ve been securing compute demand for.
00:59 Gil
And then this is really an admission that they are not currently competitive in the frontier model race.
01:05 Gil
Open AI and Anthropic are in the lead, Google’s right there. And just like Elon had to concede a few weeks ago that they’re not in the lead and therefore he can he can afford to sell compute capacity, Mark Zuckerberg’s appears to be doing the same thing if these reports are correct.
01:21 Speaker A
If Meta starts selling excess compute, Gil, who is that potentially bad news for? Are there companies who you think, listen, if they see that headline, they should be a bit nervous about that?
01:33 Gil
Yeah, this is very bad for Core Weve and Nebius.
01:36 Gil
So, more than half of Nebius’s backlog is meta. More than a third of Core Weve’s backlog is meta. If meta is in a position to turn around and sell compute, that probably doesn’t mean they need to buy anymore.
01:49 Gil
Now mind you those contracts may be secure, maybe meta will pay for them anyway, but you definitely don’t want to put a growth multiple on those contracts because meta will do with the minimum possible it needs to do and then just walk away.
02:00 Gil
Meta is not in the in the market for buying compute anymore. It appears that Meta is now in the market for selling compute. So for those particular two companies, the market is reacting very correctly today to say they’re in trouble if Meta follows through on this.
