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CNBC
2 days ago
- Business
- CNBC
After Zuckerberg spent billions on an AI 'dream team,' he has to deliver for Meta shareholders
When Mark Zuckerberg feels the heat, he opens his wallet. The 41-year-old Facebook founder and Meta CEO is on a spending spree like never before in an effort to position his company at the forefront of the artificial intelligence boom and make up for recent costly mistakes in a market that's rapidly revolutionizing the business world. Following last week's stunning $14.3 billion investment in Scale AI, which brought with it Meta's hiring of the startup's founder, Alexandr Wang, and a small group of his top staffers, Meta now plans to hire former GitHub CEO Nat Friedman and his business partner, Daniel Gross, who had been CEO of $32 billion AI startup Safe Superintelligence, CNBC reported this week. Meta previously tried to buy Safe Superintelligence, which was launched a year ago by OpenAI co-founder Ilya Sutskever, sources told CNBC. According to other sources, Meta had previously been in talks to buy Perplexity AI, which was valued at $14 billion in a funding round in May. The people who spoke to CNBC about the various dealmaking pursuits asked not to be named due to confidentiality. Zuckerberg told investors at the top of the most recent earnings call in April, "The major theme right now, of course, is how AI is transforming everything we do." At the same time, Meta upped its capital expenditures range for the year to between $64 billion and $72 billion from between $60 billion and $65 billion to reflect more data center investments in AI and potentially higher hardware costs. What Zuckerberg didn't say then is that he was about to start shelling out mounds of cash to revamp his AI organization. "Mark Zuckerberg is in founder mode and he's not going to be stopped," said Gil Luria, an analyst at D.A. Davidson, in an interview on Friday with CNBC's "Money Movers." Luria has a buy rating on the stock, but said that to win in AI, Meta needs to be successful with the next round, with the dream team that they're building." At Meta, AI is being embedded across the company, from its core online advertising unit and Instagram algorithms to its effort to build the metaverse. Better AI models and technology enhance the company's existing business, both by improving ad targeting and by bringing down costs. However, the building of fundamental models used by the vast community of developers — where the company competes with Google, OpenAI, Anthropic and others — is where Meta is viewed by many as a laggard. Meta's unique open-source approach is built around the Llama family of models. Its most recent update in April, the Llama 4 AI models, was not well received by developers. At the time, Meta only released two smaller versions of Llama 4 and said it would eventually release a bigger and more powerful "Behemoth" model. "On the heels of a successful rollout of Llama 3 a year ago, Llama 4 that came out this year was an absolute failure, almost by his admission," Luria said, referring to Zuckerberg. "Meta can't afford to fail in having the leading AI model. So they're out in the marketplace desperately trying to replace their AI team right now." Meta didn't respond to a request for comment for this story. Bringing on Scale AI's Wang was Zuckerberg's most headline-grabbing move yet. While Meta is gaining a 49% stake in the startup, Zuckerberg's real prize in the deal was hiring Wang, a dropout from the Massachusetts Institute of Technology who started his company at age 19. Zuckerberg then turned his attention to Github's Friedman and Gross, who have been investing together at their venture firm NFDG. They will work on products under Wang, one source familiar with the matter told CNBC on Thursday. Meta, meanwhile, will get a stake in NFDG, according to multiple sources. A Meta spokesperson didn't comment on the planned hires and said the company "will share more about our superintelligence effort and the great people joining this team in the coming weeks." Not all of Zuckerberg's recruits are costing billions of dollars. Some are in the tens or hundreds of millions. That's according to OpenAI CEO Sam Altman. Altman said on the latest episode of the "Uncapped" podcast, which his brother hosts, that Meta has tried to lure OpenAI employees by offering signing bonuses as high as $100 million, with even larger annual compensation packages. "I've heard that Meta thinks of us as their biggest competitor," Altman said on the podcast. "Their current AI efforts have not worked as well as they have hoped and I respect being aggressive and continuing to try new things." Meta technology chief Andrew Bosworth told CNBC's "Closing Bell Overtime" on Friday that Altman is countering the offers. "The market is setting a rate here for a level of talent which is really incredible and kind of unprecedented in my 20-year career as a technology executive," said Bosworth, who joined Meta in 2006. Wall Street is mostly giving Zuckerberg the benefit of the doubt, for now. Meta shares were flat this week after slipping about 2% last week. Shares are still up 17% for the year, outpacing the Nasdaq and all the company's megacap peers. Analysts at Argus maintained their buy recommendation on the stock this week and lifted their price target to $790 a share from $725 a share. The stock closed on Friday at $682.35. "The company's ability to capitalize on GenAI advances in advertising targeting is a particularly relevant opportunity to drive advertising spending, which is the company's lifeblood," the Argus analysts wrote. D.A. Davidson's Luria said that Zuckerberg has put more pressure on himself to turn Meta into a long-term AI leader, but said he won't bet against him. Luria said: "The last time Mr. Zuckerberg felt like he was under the gun," he snapped up Instagram for $1 billion, a deal that set the stage for Facebook to become a dominant player in mobile. That was in 2012, just as Facebook was about to hit the public market. Luria also highlighted Zuckerberg's controversial $19 billion purchase of WhatsApp two years later. He sees the Meta CEO making an equally bold wager in AI. "He's going to rebuild the team and they're going to come back," Luria said.
Economic Times
3 days ago
- Business
- Economic Times
Mark Zuckerberg made abortive attempt to buy ex-OpenAI executive Ilya Sutskever's AI startup: Report
Meta CEO Mark Zuckerberg's $14.2 billion investment in Scale AI last week, and roping in its CEO Alexandr Wang, appears to have been part of a larger game plan to build expertise in artificial intelligence (AI). Days after Sam Altman accused Zuckerberg of trying to poach OpenAI's talent, reports have emerged that Meta has been out shopping for other startups, including Ilya Sutskever's $32 billion Safe Superintelligence, launched just a year ago. Sources told news channel CNBC that Meta tried to acquire the startup founded by Sutskever, former chief scientist at OpenAI, earlier this year. However, Sutskever rebuffed the big tech giant's Zuckerberg started eyeing the chief executive of the startup, Daniel Gross. Zuckerberg is setting up a team of experts to achieve so-called "artificial general intelligence" (AGI), or machines that can match or surpass human capabilities. The Meta chief's apparent plans to personally recruit around 50 people, including a new head of AI research for the AGI team, is driven partly by frustration over the performance and reception of Meta's latest large language model, Llama 4. Altman swiped at Zuckerberg in his brother's podcast, 'Uncapped', saying that Meta tried to poach the company's AI talent for its superintelligence team. Additionally, he said Meta is not "great at innovation". The 'special thing' about OpenAI is that the company has built a culture that is good at 'repeatable' innovation, Altman noted.
Time of India
3 days ago
- Business
- Time of India
Mark Zuckerberg made abortive attempt to buy ex-OpenAI executive Ilya Sutskever's AI startup: Report
Meta CEO Mark Zuckerberg 's $14.2 billion investment in Scale AI last week , and roping in its CEO Alexandr Wang, appears to have been part of a larger game plan to build expertise in artificial intelligence (AI). Days after Sam Altman accused Zuckerberg of trying to poach OpenAI 's talent, reports have emerged that Meta has been out shopping for other startups, including Ilya Sutskever 's $32 billion Safe Superintelligence , launched just a year ago. Sources told news channel CNBC that Meta tried to acquire the startup founded by Sutskever, former chief scientist at OpenAI, earlier this year. However, Sutskever rebuffed the big tech giant's efforts. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo Subsequently, Zuckerberg started eyeing the chief executive of the startup, Daniel Gross. Zuckerberg is setting up a team of experts to achieve so-called "artificial general intelligence" (AGI), or machines that can match or surpass human capabilities. Live Events The Meta chief's apparent plans to personally recruit around 50 people, including a new head of AI research for the AGI team, is driven partly by frustration over the performance and reception of Meta's latest large language model, Llama 4. Discover the stories of your interest Blockchain 5 Stories Cyber-safety 7 Stories Fintech 9 Stories E-comm 9 Stories ML 8 Stories Edtech 6 Stories Altman swiped at Zuckerberg in his brother's podcast, 'Uncapped', saying that Meta tried to poach the company's AI talent for its superintelligence team. Additionally, he said Meta is not "great at innovation" . The 'special thing' about OpenAI is that the company has built a culture that is good at 'repeatable' innovation, Altman noted.
CNBC
4 days ago
- Business
- CNBC
The secret AI sauce behind Meta stock's 683% rise since the dark days of 2022
Picture scrolling through Facebook or Instagram and spotting an advertisement that feels tailor-made for you. You're seeing Meta Platform 's artificial intelligence tools in action, crafting ads for its partner businesses that specifically target and attract customers based on their interests. It has also become the secret sauce behind Meta's wildly success ad unit driving its stellar financial performance and stock performance. But few could see Meta's path to AI dominance just a few years ago. In 2022, the social media giant hit a low as investors balked at CEO Mark Zuckerberg's costly metaverse project and Apple's privacy changes disrupted its ad business. Meta shares fell by more than 60% in 2022, at one point closing as low as $88.91 a share. Then came Zuckerberg's "Year of Efficiency" in 2023 aimed at reversing the tide with layoffs and a focus on profitability. Meta quickly rewarded its loyal investors with a nearly 200% stock jump that year, as its AI-enhanced ads revived revenue growth and the company's cost cuts jumpstarted earnings. And despite lingering concerns over the company investing too much and too quickly in the nascent technology, it was hard to argue with the results. Meta delivered revenue and earnings beats for all four quarters of fiscal 2024. Jump to 2025 and Meta has fully repositioned itself as an AI-first company, one of the most celebrated in the field. The company's open-source Llama large language models are the cornerstone of its strategy, competing against the likes of OpenAI's GPT-4 and Google's Gemini. Zuckerberg's investments in data centers and hardware aim to secure the company's long-term edge. Building these large powerful AI models is critical to having "control of our own destiny" in powering the various AI opportunities Meta is focused on, Zuckerberg has said, emphasizing improved advertising and user experiences. As of Wednesday's close, its stock is up roughly 683% since that November 2022 closing low. Meta's AI strategy has not been without hurdles. The company delayed the release of Behemoth, its most advanced large language model, originally slated for April, until the fall or later due to performance issues. At the same time, Llama 4's release didn't generate much enthusiasm, fueling perceptions that Meta was falling behind in the AI race. The challenges compounded when 11 out of 14 AI researchers left the company amid intensified competition. The biggest risk to Meta's stock is losing its lead on the cutting edge of AI, said Gil Luria, analyst at D.A. Davidson, who noted that the underwhelming Llama 4 opened the door to competitors, including OpenAI, Anthropic and some Chinese models. Indeed, Zuckerberg personally stepped in to recruit top talent to stay out front, including bringing back Robert Fergus, a former Google DeepMind researcher and previous Meta employee, to enhance the AI division. Earlier this month, Meta made another major move investing $14.8 billion for a 49% stake in data-labeling company Scale AI and hired its CEO to lead a new "superintelligence" research lab, joined by Scale AI staff. In a sign of its aggressiveness, Meta also offered employees at OpenAI bonuses of $100 million to leave the ChatGPT creator, OpenAI CEO Sam Altman said on a recent podcast . Key growth ingredient So what exactly has made Meta's AI so special? The company's newest Llama 4 is "multimodal," which means it can process and learn from multiple types of data including text, images or backgrounds, similar to Google's Gemini and OpenAI's GPT-4 multimodal models. It powers Meta's ad growth by enabling advertisers to create tailored ads quickly and cost-effectively, and boosts engagement and performance across Facebook and Instagram. "Performance improvements from being multimodal benefit all applications," said Matt Steiner, Meta's VP of monetization infrastructure, ranking & AI foundations, in a CNBC interview. "Models trained on different data sources like images or videos or text all benefit from being trained on the same model," he added, noting this versatility drives better ad targeting and content creation. Steiner emphasized that this approach "helps us maintain our competitive edge in advertising by maximizing return on advertiser spend while controlling costs." Meta trails only Google in digital advertising, capturing 23% of global ad revenue in 2024 compared to Google's 28%, according to eMarketer. Meta's ad revenue rose 22% last year, outpacing Google's 12% and the industry's 9%. This growth, driven by AI-powered targeting, underscores Meta's momentum. "The ability to deliver better ads allows them to sell those ads for more, which is why they're gaining share in the digital ad market," said Luria, noting that Meta has been adept at using traditional machine learning techniques. He said Meta is taking this technology to an advanced level, "automating it further — allowing advertisers to generate content and make even more well-informed decisions." This next wave, generative AI, "deepens Meta's competitive moat." He highlightdc an example of how Reels is becoming more compelling to users. That's because Meta is "getting better at the AI algorithm that allows them to serve the next best short video to keep the consumer engaged." The introduction of ads on WhatsApp, announced this week, also expands the reach of Meta's AI ad tools, creating a new place where it can generate high-margin revenue. Meta on Tuesday announced new generative AI tools for its Advantage+ platform, enabling advertisers to integrate brand elements into personalized ads and create animated videos from images with music and text overlays. The company is also testing a new feature in "Video Highlights" which uses AI summaries to better digest video ads by skipping to the highlights of the video. Looking ahead, Meta's generative AI advancements are enabling it to deliver a higher volume of personalized ads. The goal: To keep and strengthen its AI edge. As Meta's Steiner put it, the company's "compounding effects" of AI improvements fuel growth, which should help Meta make more gains in digital advertising. The company's financial and strategic commitment show Zuckerberg and Co. are in a league of their own in digital ads as Meta continues to take market share. We're confident in Meta's ability to keep innovating on its advertising tools using AI, keeping customers around and its business growing. We currently have a 2 rating on the stock with a price target of $750. (Jim Cramer's Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Time of India
5 days ago
- Business
- Time of India
OpenAI CEO Sam Altman reveals why ChatGPT maker's 'best people' rejected Mark Zuckerberg's $100 million offers: They're a company that's ...
OpenAI CEO Sam Altman delivered a brutal assessment of Meta 's innovation capabilities, explaining why his top engineers turned down Mark Zuckerberg 's eye-watering $100 million signing bonuses. "There's many things I respect about Meta as a company, but I don't think they're a company that's great at innovation," Altman said on his brother's "Uncapped" podcast Tuesday, revealing the core reason behind his staff's rejection of the offers. Speaking candidly about Meta's aggressive poaching attempts, Altman said the Facebook founder had "started making these giant offers to a lot of people on our team" but boasted that "none of our best people have decided to take them up on that." Why OpenAI engineers chose Sam Altman's OpenAI over working for Mark Zuckerberg The OpenAI chief suggested his employees see the company as having "a much better shot actually, delivering on superintelligence and also may eventually be the more valuable company." Despite Meta's $1.77 trillion market cap dwarfing OpenAI's $300 billion valuation, the ChatGPT maker's engineers appear unconvinced by pure financial incentives. Altman criticized Meta's strategy of focusing on massive upfront compensation packages, saying it would damage company culture. "The degree to which they are focusing on that and not the work and not the mission, I don't think that's going to set up a great culture," he said. Meta's desperate talent hunt amid AI setbacks Meta's aggressive recruitment drive comes after a series of embarrassing setbacks in the AI race. The company has delayed its flagship "Behemoth" AI model and faced criticism over inflated performance metrics for its Llama 4 language model. "I've heard that Meta thinks of us as their biggest competitor," Altman said. "Their current AI efforts have not worked as well as they have hoped and I respect being aggressive and continuing to try new things." The Facebook founder has been personally calling AI researchers as part of his frantic bid to build a "superintelligence" team, even rearranging Meta's Menlo Park headquarters to put the new unit near his office. Meta recently invested $14.3 billion in Scale AI and hired its founder Alexandr Wang , but the talent war for AI supremacy rages on. AI Masterclass for Students. Upskill Young Ones Today!– Join Now
