Jeffrey Yass, wealthy entrepreneur, divests 29% of Susquehanna's ownership in Nvidia and expands his investment in a substantial Artificial Intelligence (AI) corporation.
Artificial intelligence (AI) has been a significant investing fad since ChatGPT made its entrance in late 2022. The potential is immense, but analysts haven't let that discourage them from making predictions. In a recent report by PwC, the firm anticipated an additional $15.7 trillion in global economic activity by 2030.
Wall Street's wealthiest investors are anticipating AI to permeate each sector of the global economy. Due to the quarterly disclosures mandated by the Securities and Exchanges Commission, the public is privy to the AI-related businesses that billionaire fund managers are backing.
Jeff Yass, a prominent billionaire on Wall Street, gained recognition decades ago as an options trader. Currently, the fund he manages, Susquehanna International, not only deals with options but also acquires and sells shares of AI-related firms.
During the third quarter, Yass and Susquehanna divested shares of the AI gold rush's primary supplier of tools, Nvidia. Susquehanna reduced its Nvidia stake by 30%, or approximately $722 million. Although the common stock sale seems straightforward, it's essential to remember that the firm employs intricate option trading strategies. Preliminary inspection suggests that Yass sold Nvidia to accumulate substantial quantities of another significant AI-focused stock, Meta Platforms (META 0.71%).
Meta Platforms is gaining favor on Wall Street
Susquehanna's stake in the parent company behind Instagram and Facebook swelled by 54% during the third quarter, reaching $759 million. The firm's own sell-side analysts recently adjusted their price target for Meta Platforms stock to $675 per share and maintained a favorable rating. At recent prices, the target implies a 22% increase.
Engineers at Meta Platforms have long utilized machine learning to enhance their recommendation engines. Although the endless suggestions can be off-putting, causing me to steer clear of social media, the majority of users seem unaffected. Approximately 3.2 billion individuals utilize at least one of Meta's applications daily.
In 2023, ChatGPT became the fastest consumer application to attain 100 million users. Like many companies in Silicon Valley, Meta Platforms was taken aback by the substantial demand for generative AI applications. However, the company quickly adapted. According to CEO Mark Zuckerberg, Meta AI already has over 500 million monthly active users. In October, more than a million advertisers utilized Meta's generative AI tools to create over 15 million ads.
Increasing engagement and ad creation is not Meta Platforms' ultimate objective for its AI endeavors. Zuckerberg intends to establish Meta as a major player in the AI field beyond its family of applications. To achieve this, the company is training Llama, an open-source large language model, on a cluster of graphics processors more potent than 100,000 Nvidia H100 units.
Cautionary measures
Before investing your savings in Meta Platforms stock, it's crucial to acknowledge that the company is taking a substantial gamble on AI, and there's no guarantee of a return.
In 2024, Meta anticipates spending between $38 billion and $40 billion on capital expenditures. The principal expenses will be servers, data centers, and network infrastructure necessary to fuel its AI objectives.
The investments Meta is making in its future skyrocketed this year from the $28.1 billion it allocated in 2023. An additional $10 billion to $12 billion this year might only be the beginning of Meta's AI investment spree. Management expects a significant uptick in infrastructure expense growth in 2025.
Meta Platforms' ambitious AI push isn't the sole venture experiencing financial losses at present. Realty Labs revenue climbed to $270 million in the third quarter, but this didn't come close to offsetting expenses. The segment reported an operating loss of $4.4 billion during the three months ending Sept. 30.
Buy, sell, or hold?
Meta's investments are enormous, but so is its profit. The company generated $52 billion in free cash flow over the past 12 months.
This March, the company announced it would distribute $50 billion in profit to investors as share buybacks. It also launched a dividend program, compelling management to reassess its bottom line whenever it makes an investment decision.
Meta stock is currently priced at around 26 times forward-looking earnings expectations. Although this multiple is historically high for Meta, earnings per share have more than tripled over the past five years. While I'm not enthused about purchasing Meta at its current price, there's still a reasonable chance that it can surpass the market over the long term.
Given the current context, here are two sentences that contain the words 'investing', 'money', and 'finance':
wall Street's wealthiest investors are actively investing money in AI-related businesses, anticipating their potential impact on various sectors of the global economy.
Meta Platforms' ambitious AI push is a significant investment in the company's future, requiring substantial capital expenditures but also promising potential returns in the finance sector.
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