Leviathan's Lull: Meta's AI Delay—Strategic Caution or Competitive Crisis?
39min read Meta Platforms’ delayed launch of its “Leviathan” AI initiative—a codename for its ambitious infrastructure and model development—has sparked debate among investors: Is this a calculated move to refine its AI strategy, or a red flag signaling competitive vulnerability? Let’s dissect the data to determine whether Meta’s stock (META) remains a buy in the AI race.
The Leviathan Delay: Cause for Concern or Strategic Ingenuity?
Meta’s AI rollout in the EU faced regulatory hurdles tied to GDPR compliance and user data consent (see ). Privacy advocates like Noyb pressured the company to halt its use of public user data for AI training without explicit opt-in—a battle that delayed its multimodal Llama models.
The Bull Case:
- Regulatory Compliance as a Strength: Meta’s focus on aligning with EU regulators could position it as the “privacy-first” AI player, appealing to users wary of overreach. This慎密 approach may avoid costly lawsuits (e.g., Noyb’s $10 billion class-action threat) and build long-term trust.
- Iterative Development: The delay allows Meta to refine its Llama models, which already outperform competitors in multilingual tasks. Its $72 billion 2025 capex—funding in-house AI chips and data centers—aims to reduce reliance on NVIDIA’s GPUs, cutting costs and boosting control over its AI stack.
The Bear Case:
- Competitive Lag: Rivals like Google (GOOGL) and Microsoft (MSFT) are deploying advanced AI tools (e.g., Gemini, Azure AI) faster. Meta’s delayed EU rollout risks ceding market share to these players, which are already monetizing AI through cloud services and enterprise tools.
- Monetization Uncertainty: Threads and the standalone Meta AI app lack clear revenue streams, unlike ChatGPT’s subscription model. Without AI-driven revenue growth, Meta’s ad-centric business model may struggle against macroeconomic headwinds.
Valuation: Is Meta Priced for AI Dominance?
Meta’s forward P/E of 24.18X sits between Alphabet’s 16.26X and Amazon’s 31.44X, suggesting a middle-of-the-road valuation. However, its 19% YoY ad revenue growth (driven by AI-enhanced targeting) and $10.3 billion in Q1 free cash flow provide a strong foundation.
Key Risks to Valuation:
1. Regulatory Overreach: The EU’s Digital Markets Act and antitrust trials threaten Meta’s ownership of Instagram/WhatsApp, critical data sources for AI training.
2. Infrastructure Costs: Scaling 1.3 million GPUs and custom chips may strain cash reserves if ROI falters.
3. Technical Debt: Relying on older NVIDIA GPUs (pre-Leviathan) could slow model iteration, allowing rivals like DeepSeek (China) to undercut costs.
Actionable Insights for Investors
- Buy Meta If:
- You believe its $72B capex will yield a proprietary AI infrastructure advantage.
Regulatory risks are overblown, and Meta’s user base (3.43B monthly active users) ensures unmatched training data.
Avoid or Short Meta If:
- The Leviathan project faces further delays, exacerbating reliance on costly NVIDIA GPUs.
Ad revenue growth stalls below 15% as rivals encroach on its social media dominance.
Alternative Plays:
- NVIDIA (NVDA): Owns the AI “plumbing” (GPUs) that Meta and others depend on. Its Blackwell chips are central to Leviathan’s success.
- Alphabet (GOOGL): Benefits from AI-driven search upgrades and cloud growth at a cheaper multiple.
Final Verdict: Leviathan’s Lull Is a Buying Opportunity—With Caveats
Meta’s delay isn’t a death knell but a reminder of the AI race’s complexities. Its valuation remains reasonable given its scale and AI investments. Investors should buy META at $270–$280, targeting $350 by year-end if it executes its chip rollout and EU compliance. However, keep a close eye on regulatory rulings and Leviathan’s timeline. For the bold, this is a bet on Meta’s long game—but prepare for volatility along the way.
Act now, but don’t ignore the risks—Leviathan’s fate could redefine Meta’s future.
