Meta Platforms (NASDAQ:META) stock will have a critical and interesting 2024. CEO Mark Zuckerberg is the only Cloud Czar founder who still owns his company. The CEOs of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.Com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) are employees. Their fortunes don’t change by billions when their stock moves. Zuckerberg’s does.
But we’re no longer in the pure “cloud” era, the time Zuckerberg helped define. AI is a different game, with different rules. It will have different outcomes. Can Zuck remain a King on this new battlefield?
Is META Stock Out of Time?
Zuckerberg built a 12-figure fortune ($136 billion at last count) by seeing Facebook’s users as an opportunity to build infrastructure. He committed the company to the cash flow drain of cloud before he had the money. Meta, then named Facebook, succeeded by pushing the envelope on costs, creating the Open Compute Foundation to share best practices.
Facebook needed cloud to monetize its traffic. AT&T (NYSE:T), IBM (NYSE:IBM), and General Electric (NYSE:GE) all feinted toward cloud, but never committed, because they didn’t share this need. Facebook’s user-generated traffic made it a Cloud Czar and META stock was on a roll. Seeing the opportunity, and seizing it, is the greatest business move of the century, so far.
But that was then.
AI Is a New Era
AI is supposed to be a different ballgame, which is a problem and an opportunity for META stock.
The game now is about building a software stack, a framework, and large language model tied to reliable training data. The winners will be companies whose stacks come up with the best answers to the questions consumers ask.
Meta’s big advantage in AI is what it already owns: a decade of user data. It can train its models on this data because it has secured rights to it.
Beyond this, Zuckerberg’s answer is the same as before, open source. Open Llama is an open source “reproduction” of the code Meta is running. The most advanced version of Meta’s Large Language Model, Llama 2, is available here.
But there are two problems. First, AI is so critical that rivals want open source excluded from it. Open code can be exploited by bad actors. We’re already seeing that.
Second, any open source promise Meta makes now is a “pie crust” promise: easily made and easily broken. In Google vs. Oracle, the Supreme Court ruled for Alphabet only on the basis of fair use. Oracle’s right to buy the open source Java code, then close the source, was never questioned.
As a result, developers can no longer take a company’s open source promises seriously. The code you’re depending on can be seized by just changing the license. Meta has yet to put its open source AI code into an external foundation.
The Bottom Line
We had our chance to grab Meta stock a year ago. We blew it. I was wrong.
At the bottom of the 2022 tech wreck, Meta stock was trading under $100. It’s now trading at over $390.
AI is just one reason. Twitter’s problems let Threads thrive. American politicians pushed down TikTok, benefitting Meta’s Reels.
You don’t even have to worry about Zuckerberg being run over by a bus. Adam Mosseri, who runs Instagram, could step in as easily as Andy Jassy took over at Amazon.
There’s also this. Meta represents the free web in most of the world. WhatsApp is vital to business in places like India, South Africa, and Argentina. Meta has brought more people out of extreme poverty than any other company, ever. It’s as vital a utility in the developing world as AT&T was a generation ago.
It’s good to be the King. Especially when you’re looking to capture a new empire, and you’re not yet 40. There’s still time for you to get in on the adventure.
As of this writing, Dana Blankenhorn had LONG positions in AMZN, AAPL, MSFT and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
