Meta's AI CapEx Spend is Paying Off, Analyst Says

Meta's heavy investment in AI-related capital expenditures (CapEx) is already paying off, according to an analyst. The company's CapEx-to-sales ratio is higher than its peers, leading to questions about the rationale behind its spending. Despite this, Meta is committed to investing in AI and data centers, with plans to expand its data center presence in the US. The analyst notes that Microsoft has indicated it will slow down its CapEx spending, while Meta is going all-in on AI, including open-source initiatives and consumer hardware business.

Meta Platforms (META.O) has been making significant strides in its artificial intelligence (AI) endeavors, with a substantial increase in capital expenditures (CapEx) on AI infrastructure and data centers. The company's latest earnings report revealed that it plans to spend between $66 billion and $72 billion on AI-related CapEx in 2025, a significant increase from previous years [1].

This investment is part of Meta's broader strategy to compete in the AI race, as CEO Mark Zuckerberg has emphasized the importance of AI in driving the company's core advertising business [1]. The company's aggressive CapEx spending on AI has led to a higher CapEx-to-sales ratio compared to its peers, sparking questions about the rationale behind this spending.

Despite the higher CapEx-to-sales ratio, Meta's AI-driven ad tools have been paying off. For instance, AI-powered ad recommendations drove about 5% more conversions on Instagram and 3% on Facebook in the second quarter [1]. However, the company's spending on AI and data centers is expected to continue, with plans to expand its data center presence in the US and other regions [3].

Microsoft (MSFT.O), a major competitor in the AI space, has indicated that it will slow down its CapEx spending. In contrast, Meta is going all-in on AI, including open-source initiatives and consumer hardware business. This strategy is reflected in the company's recent acquisition of a stake in Scale AI, a startup focused on AI data infrastructure [1].

While Meta's heavy investment in AI is a strategic move to stay competitive in the rapidly evolving tech landscape, the high CapEx-to-sales ratio may raise concerns among investors. The company's ability to generate returns from these investments will be crucial in determining the long-term success of its AI strategy.

References:

[1] Reuters. (2025, July 30). Meta narrows annual capex forecast amid AI race. Retrieved from https://www.reuters.com/business/media-telecom/meta-shares-jump-ai-fuels-ad-sales-outweighing-big-capital-costs-2025-07-30/

[2] Hindustan Times. (2025, July 30). Meta offered up to $1 billion salary to poach talent from former OpenAI CTO. Retrieved from https://www.hindustantimes.com/technology/meta-offered-up-to-1-billion-salary-to-poach-talent-from-former-openai-cto-report-101753964428005.html

[3] TechCrunch. (2025, July 30). Meta to spend up to $72B on AI infrastructure in 2025 as compute arms race escalates. Retrieved from https://techcrunch.com/2025/07/30/meta-to-spend-up-to-72b-on-ai-infrastructure-in-2025-as-compute-arms-race-escalates/