Massive AI Investment Overshadows In-House Chip Progress
Meta Platforms (NASDAQ:META) shares fell 2.6% on Thursday morning as investors focused on the enormous cost of the company’s artificial intelligence expansion, despite progress toward developing its own AI chips.
The social media giant revealed plans to begin production of its first internally designed AI chip, code-named “Iris,” in September. The processor is part of Meta’s four-generation Meta Training and Inference Accelerator (MTIA) programme, developed to reduce reliance on third-party chip suppliers such as Nvidia and Advanced Micro Devices.
Meta is partnering with Broadcom on chip design, while Taiwan Semiconductor Manufacturing Co. (TSMC) will handle production.
AI Infrastructure Spending Raises Investor Concerns
While the long-term strategy aims to lower computing costs, the scale of Meta’s near-term investment prompted concerns over the impact on profitability.
According to an internal memo reviewed by Reuters, the company plans to deploy seven gigawatts of computing infrastructure this year before doubling that capacity by 2027.
To support the expansion, Meta expects to invest as much as $145 billion in AI infrastructure during the current year, representing a substantial share of the technology industry’s estimated $700 billion in planned AI spending.
The scale of that capital expenditure weighed on investor sentiment, as markets often react cautiously when major infrastructure investments pressure near-term earnings before generating meaningful revenue.
Supply Agreements Secure Long-Term Expansion
Meta is also strengthening its supply chain through long-term agreements with Samsung Electronics, Sandisk and Sumitomo Electric to secure the components required for its growing data centre network.
With major technology companies competing aggressively to expand AI infrastructure, demand for memory and advanced chips has continued to drive component prices higher.
Morgan Stanley analysts recently warned that rising semiconductor costs have contributed to “chipflation,” a trend that could increase infrastructure expenses across the technology sector and place additional pressure on Meta’s margins in the coming quarters.