Meta Platforms is potentially forfeiting billions in cloud revenue because it has found a more promising use for its computing power through its Muse AI initiative. Wells Fargo recently updated its outlook, noting that early success with Muse may require Meta to retain more computing capacity for itself rather than leasing it out, leading to a reduction of approximately $5 billion in expected revenue from capacity resales by 2027. This trade-off is viewed positively, as the potential for Muse to become a significant revenue generator outweighs the immediate financial benefits of renting out unused capacity.
Jim Cramer emphasized the value of utilizing computing resources productively rather than merely for renting. Meta’s strong advertising business allows it to invest in long-term AI development rather than short-term cloud rentals, especially in light of rising competition from new cloud providers. Earlier this year, investor sentiment was uncertain regarding Meta’s cloud prospects, exacerbated by disappointing earnings and a lack of clear direction.
However, things improved significantly with the launch of Muse, an AI tool aimed at consumers and businesses. Meta’s stock surged after the introduction of Muse, with Wells Fargo predicting substantial revenue growth in the upcoming quarter. While there may not be an immediate financial benefit from Muse, investors are optimistic that it will contribute meaningfully starting in 2028. Overall, the shift away from a cloud business model toward developing internal AI capabilities seems favorable for Meta’s long-term growth.
