Meta Platforms Eyes AI Video Startups, Boosts AI Investments

Meta Platforms, the technology giant behind Facebook, Instagram, and WhatsApp, is in talks with two AI video generation startups, Pika and Higgsfield. The discussions with Pika include potential acquisition or technology licensing, while negotiations with Higgsfield have reportedly stalled. This strategic move is part of Meta's broader initiative to enhance the content generation capabilities of its social media applications, smart glasses, and virtual reality (VR) services.

Meta's interest in these AI video generation companies aligns with its ongoing efforts to integrate AI into its products. This year, Meta has been actively pursuing AI-related transactions. In June, the company acquired a 49% stake in the data platform Scale AI for nearly 150 million dollars and appointed its 28-year-old CEO as Meta's AI chief. Additionally, Meta acquired a small AI voice generation startup, PlayAI, in July, although the terms of the deal were not disclosed. Prior to these acquisitions, Meta had attempted to acquire other AI companies, including Perplexity AI, Runway AI, and FuriosaAI.

In addition to acquisitions, Meta has been aggressively recruiting high-end AI talent from competitors such as Google, OpenAI, and Apple. The company has formed a powerful "Meta Superintelligence Labs" team by offering substantial compensation packages. In July alone, Meta hired multiple researchers from OpenAI, including several key figures. The company has also recruited executives from startups and other tech giants to bolster its AI capabilities. Notably, Meta recently hired the head of Apple's large language model team with a 200 million dollar compensation package, along with two other former Apple employees who worked under him.

To support its superintelligence initiatives, Meta is seeking to raise 290 million dollars in funding. A significant portion of this funding, 30 million dollars, will come from private equity firms, while the remaining 260 million dollars will be raised through debt financing. This financial backing is crucial for Meta's ambitious plans to invest in talent, infrastructure, data centers, and energy, ensuring its competitiveness in the rapidly evolving AI landscape.

Meta's recent financial performance has been robust, with strong second-quarter revenue and third-quarter guidance. The company's advertising business continues to grow rapidly, providing the financial foundation needed to support its substantial investments in AI. Meta's second-quarter revenue reached 475.2 million dollars, a 22% year-over-year increase, surpassing market expectations. The company also reported a 38% year-over-year increase in diluted earnings per share, which exceeded market forecasts. Meta anticipates third-quarter revenue to be between 475 million dollars and 505 million dollars, with the midpoint of this range exceeding analyst expectations.

Meta has also increased its capital expenditure forecast for 2025, reflecting its continued investment in talent, infrastructure, data centers, and energy. The company expects its expenditures for this year to range between 660 million dollars and 720 million dollars. This forecast was adjusted in April due to ongoing trade disputes and AI investments. Meta anticipates that costs will continue to rise next year, particularly in infrastructure and employee compensation.

Despite the short-term impact on profitability, Meta's substantial investments in AI are expected to position the company as a leader in the AI sector. The improvements in AI have already contributed to Meta's strong second-quarter performance, enabling the company to increase the average price of its advertisements. This strategic focus on AI is likely to drive long-term growth and innovation, solidifying Meta's position as a dominant player in the tech industry.