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Instagram vs. Reality: Why Meta can afford to burn billions on the metaverse

Instagram vs. Reality: Why Meta can afford to burn billions on the metaverse

2/4/24 7:00PM

Most companies could never dream of burning $40bn over 3 years developing a new product. But, then again, most companies don't have a business that has churned out $163bn of operating profit to fund that investment.

And, while virtual reality has yet to become actual reality for many Meta-owned platform users, there’s already some fierce competition in the form of Apple's long-awaited Vision Pro VR headset, which hit shelves on Friday having sold an estimated 200k pre-order units at $3,499 apiece.

Bot pursuit

Although Meta is still waiting for its big bet on VR to pay off, the company didn't shy away from pouring resources into AI as the sector exploded last year. Meta launched LLaMA 1, its first iteration of a generative AI large language model, in February 2023, and only a year later it has already begun training LLaMA 3, its latest attempt in building towards artificial general intelligence (AGI).If you want to get a sense of where Zuckerberg & Co’s focus is, earnings calls aren’t a bad place to start. The term “metaverse” came up a total of 20 times in the earnings call from Q2 2021, as the company rebranded to “Meta” to better encompass its virtual world vision. But, recently, “AI” has been getting all the love — with a whopping 72 mentions in Meta’s Friday call.

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Sherwood Staff
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“Tomorrow” podcast, today! At Meta, fact-checking is out and AI chatbots are in. At Tesla, sales are down

Joshua Topolsky and Rani Molla are back to discuss what’s happening right now — and next — in the world of technology, culture, business, and the internet. This week:

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OpenAI’s “AI in America” blueprint is really a list of demands for the US government

Framed as a plan for ensuring American superiority in AI, the document warns that overregulation will drive hundreds of billions of dollars to Chinese AI projects.

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Bezos’ Blue Origin just scrubbed the debut launch for its flagship rocket

The SpaceX rival has grand plans for the New Glenn rocket, if it ever gets off the ground.

business

Analysts raise Amazon price target on generative-AI opportunities

Morgan Stanley called Amazon an “underappreciated GenAI leader” in an analyst note Monday and raised the e-commerce giant’s price target to $280 from its previous target of $230.

That would imply a 29% increase from where the stock is trading today.

“While we believe the market largely appreciates AWS for its strong GenAI position, AMZN’s GenAI opportunities down the Retail P&L are less appreciated,” Morgan Stanley wrote. It believes the company’s increasing use of AI to improve recommendation algorithms, shopping assistants, logistics, and advertising will lead to “more durable and profitable Retail growth.”

HSBC came to a similar conclusion its own report Monday, raising Amazon’s price target and saying generative AI would “play a far greater role in driving growth” in 2025.

markets

Stock strategists say bonds are the most important thing for markets now

In his weekly note, Morgan Stanley’s top US equity-market analyst, Mike Wilson, boiled down the recent stock sell-off to the upward move in bond yields. High-flying tech shares like Nvidia and Palantir have been upended, tumbling 6% and 16%, respectively, last week.

“Interest rate sensitivity has returned as a key driving force for equity markets. Friday’s hot payroll report furthered that dynamic.”

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