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You have to admire Meta Platforms’ public relations savvy. Its Monday announcement that it was putting an additional $40 billion into its giant Louisiana data center—making its total investment in the facility $50 billion—was perfectly designed to win over what has become a critical constituency in the data center market: local communities. “Teachers and Local Businesses Win as Meta Expands Louisiana Date Center” was the headline on the press release. Take that, data center opponents!
Among the testimonials was one from the owner of a local taco business, who was quoted saying, “Meta gave us the courage to grow here.” Meta’s approach makes a lot of sense, given the number of cities or states contemplating data center bans. Then again, Meta shareholders might prefer a different press release, one headlined “Meta Shareholders Win as Meta Spends Less on Data Centers.” Thanks to Meta’s spend-like-there’s-no-tomorrow approach to AI investment, its stock has fallen 8.6% over the past 12 months, making it one of the worst-performing big tech stocks. It fell 1.9% on Monday, a bigger drop than the overall market’s.
You can see how much Meta has fallen out of favor with investors by looking at its stock valuation relative to analyst expectations for its near-term sales growth. For example, Meta’s stock is now trading at a forward sales multiple of 6.3 times, down from 9.3 a year ago. Things would have been even worse if the stock hadn’t rallied in the past week or so, after reports emerged that Meta was contemplating renting out some of its spare data center capacity to other firms.
That rally was something of an overreaction. While Meta could pick up some pocket money from renting out spare capacity, as Elon Musk’s SpaceX has done, there’s no indication CEO Mark Zuckerberg wants to pivot away from his AI strategy of becoming a cloud provider. In other words, any spare money the company might get from renting out its servers won’t likely be meaningful relative to the hundreds of billion it is spending on AI. And until Meta demonstrates how it will get a return on that investment, it's unlikely to see a sustained rally in the stock.
SpaceX’s Stock Slide
When will SpaceX stock fall below its IPO price? Judging from the last few days, it could be any day now. Shares of the cloud and rocket firm closed down 4% on Monday at $139.14, their lowest close since it went public at $135 a share a month ago.
Shares of the Elon Musk–controlled behemoth had reached a high of $211 two days after its IPO, so the stock has dropped 34% since then.
Notably, the closing price on Monday was a few dollars above its low for the day of $136.78. That suggests there’s buying support at a certain level, but it doesn’t appear to be strong enough to prevent a gradual slide. That’s understandable: More shares are due to come onto the market when the first block of pre-IPO shares are allowed to trade, a couple of days after SpaceX delivers its first earnings report, which should be in the next month or so. That volume is likely to depress the price, so smart investors won’t likely want to be paying too much ahead of that.
In Other News
• Samsung Electronics aims to begin operations at its first chipmaking plant in the city of Yongin, south of Seoul, by 2029, two years earlier than originally anticipated. The accelerated opening reflects surging demand for memory chips and the AI infrastructure boom.
• Smartphone shipments around the world fell 11% in the second quarter, Counterpoint Research reported on Monday, which it said was the lowest level for that quarter in 13 years.
Today on The Information’s TITV
Check out today's episode of TITV in which we speak with our AI reporter about the highlights from the ICML AI research conference.
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