Why Facebook founder Mark Zuckerberg has increased Meta's AI budget by billions of dollars

Meta , the company that owns Facebook , Instagram , and WhatsApp , surprised investors by announcing it will spend billions more on artificial intelligence (AI) than initially planned. The tech giant now expects to spend between $35 billion and $40 billion this year on building AI systems and infrastructure, a substantial increase from its earlier estimate of $30 billion to $37 billion.

The main reason for the massive spending hike? Mark Zuckerberg , Meta's CEO, is determined to make his company a leader in the hot field of AI. After the success of ChatGPT , an AI chatbot that can engage in human-like conversations, Zuckerberg shifted Meta's focus to incorporating AI across its apps and services.

From smarter search on Facebook and Instagram to AI-powered image creation tools and intelligent virtual assistants, Zuckerberg wants to put AI everywhere at Meta. He believes this will help Meta create innovative new products and remain competitive in the years ahead.

Investors, however, were spooked by Meta's AI spending plans. Meta's stock plunged over 16% on Wednesday after the earnings announcement. Not only is the company raising its spending forecast, but it also warned that revenue growth may slow in the coming months.

Meta did report substantial revenue of $36.5 billion for the first three months of 2024, up 27% from a year earlier. However, it was predicted that the current quarter revenue could come below analysts' estimates at $36.5 billion to $39 billion.

Zuckerberg's grand AI visionMeta CEO Mark Zuckerberg warned shareholders that it will likely take "several years" to turn its generative AI technologies into major revenue sources. However, he expressed optimism that the large upfront costs will pay dividends by creating new AI-powered products and features that drive user engagement and advertising opportunities.

"Building the leading AI will also be a larger undertaking than the other experiences we've added to our apps, and this is likely going to take several years," Zuckerberg said on an investor call. "But the initial signs are quite positive here, too."

Meta has moved aggressively to integrate generative AI across its apps and services. Last week, it launched a ChatGPT rival called the Meta AI assistant. It added AI-powered tools for summarising text, analysing code, creating imagery, and tutoring maths across Instagram, Facebook, WhatsApp, and other platforms.

Zuckerberg said "tens of millions" of people have already tried the Meta AI assistant since its launch. But he acknowledged it would take time to build advanced AI systems that are useful enough to become major moneymakers.

"There are several massive ways to build a business here," Zuckerberg said of generative AI's commercial potential. "We should have confidence that if these AI products become widely used, they will become huge businesses over time."

Zuckerberg’s meta dreams keep bleeding more moneyAside from AI, Meta is also pouring money into developing virtual reality hardware and software through its Reality Labs division. The goal is to build the "metaverse" - Zuckerberg's vision of interconnected digital worlds.

Reality Labs lost $3.8 billion in the first quarter despite $440 million in sales as Meta invested in headset development and Horizon, its metaverse operating system. Despite this, Zuckerberg remains committed to these efforts, saying Meta's smart glasses developed with Ray-Ban are selling out in some markets.

“I used to think that AR glasses wouldn’t really be a mainstream product until we had full holographic displays,” he said. “But now it seems pretty clear that there’s also a meaningful market for fashionable AI glasses without a display.”

Just earlier this week, the Ray-Ban Smart Glasses got the multimodal AI capabilities, which enables the glasses to see what you are seeing. Then, there are new styles and colours coming in the US and other markets, in time for summers.

Historically dependent on digital advertising, Meta is now staking its future on cutting-edge technologies that could open up entirely new revenue sources. Whether Zuckerberg's multi-billion dollar AI gambit pays off remains to be seen. But the Facebook founder has made it clear - he's willing to spend whatever it takes to transform Meta into an AI powerhouse