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Are the biggest technology firms overinvesting in artificial intelligence? Probably. Meta Platforms’ $40 billion in capital spending this year, for example, will be around double what it allocated in 2021. Shareholders have been broadly supportive of that. But what happens if companies give away the results of their investment for free?That’s effectively what CEO Mark Zuckerburg is promising to do. His $1.1 trillion company says that its new AI models – the latest, Llama 3.1, was released on Tuesday – will be given to developers to tweak and freely use, plugging in their own data without having to share it with Meta. That’s a divergence from rivals who are pursuing more proprietary strategies. Microsoft-backed OpenAI, for example, is charging for access to its own technologies.This might sound like a giant involuntary giveaway on the part of the shareholders who effectively fund Meta’s AI investment. The theory, though, is that Meta will end up long-term richer for it. Zuckerberg says that putting Llama into as many hands as possible will speed up the development of new products and tools, and lower associated costs. There’s something to this argument. Having multiple people fooling around with AI will no doubt generate unexpected uses. It should also strike a competitive blow against rivals like OpenAI whose products are effectively paywalled.One encouraging precedent is Android, the smartphone operating system owned by Alphabet. The parent company of Google bought the bones of Android for an estimated $50 million in 2005, a deal a Google executive later called the company’s best ever. Google licensed the software for free, but initially insisted phones have the company’s online store, search and browser preinstalled. That eventually generated regulatory pushback, but cemented the company’s dominance in mobile search and underpins its $2.1 trillion valuation.Zuckerberg’s firm is spending a lot more than Alphabet did: $120 billion in capital expenditure over the next three years, according to analyst estimates from LSEG. For that to generate a return of, say, 20%, Meta will have to add $24 billion of annual earnings. Such a sum would be equivalent, based on its current profit margin, to nearly $75 billion of revenue – roughly half again on top of what it is expected to make this year. The question is where so much extra revenue will come from, if not from charging for AI models. That’s something even the souped-up Llama might struggle to answer.
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Meta Platforms released its Llama 3.1 artificial intelligence models on July 23, and said that it would follow an “open source” strategy where developers can use and modify its models free of charge. CEO Mark Zuckerberg said that Llama 3.1, which can translate and answer questions in eight languages, answer more complex queries and write computing programs, is competitive with most advanced AI offerings produced by rivals. He added that he expects Meta’s future models to become the most advanced in the industry.More By This Author:S&P 500 Earnings Dashboard 24Q2 – Friday, July 26
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