When you think of Meta (META), you might think of Facebook, Instagram, or, shudder, the metaverse. But the social media company has quickly become an artificial intelligence darling up there with the likes of OpenAI, Microsoft (MSFT), and Google (GOOG, GOOGL).
Meta’s AI success comes via its Llama family of models, which the company is infusing across its various social platforms — including its Meta AI assistant for Facebook, Instagram, and WhatsApp. Businesses are also putting Llama to work. In August, Meta reported organizations ranging from Accenture (ACN) and DoorDash (DASH) to Goldman Sachs (GS) are using Llama to develop their own AI software.
It’s not just that Meta is implementing its AI into its own products, though. The company is also offering up its Llama models as open-source software. Open-source software is, generally, software that companies create and then allow developers to download and augment for free. That contrasts with, say, OpenAI, which uses a closed-source software approach for its GPT family of models.
All of that has helped to make Meta a formidable force in the AI space and a potential threat to its AI rivals.
“If Llama did not exist, OpenAI and [Google’s] Gemini would be in a better position,” Deepwater Asset Management managing partner Gene Munster told Yahoo Finance. “There are undoubtedly some developers who, if not for Llama existing, would have been probably forced to go to Gemini or GPT.”
But the AI industry is still in its infancy, and there’s no telling which company will be the big winner in the long run.
Meta is playing the long game
Meta’s AI strategy should provide a number of benefits for the company in the near and long term. Out of the gate, the company is able to apply its Llama models to its products, helping to improve its own offerings while simultaneously proving the software’s worth in real-world scenarios.
After all, if Meta is using its models in its own products, why shouldn’t third-party developers? And because the Llama family is open source, developers can take a look under the software’s hood, allowing them to address any flaws or risks over time.
“Meta has been democratizing AI, open sourcing it, utilizing what they're building in their own platforms,” said Futurum Group CEO Daniel Newman. “They've been doing it really at all the layers.”
Of course, Llama won’t just help Meta improve its existing software and build goodwill among developers, it could also prove to be a steady revenue stream in the long run.
“We want this to be open, but if you're someone like Microsoft or Amazon or Google and you're going to basically be reselling these services, that's something that we think we should get some portion of the revenue for,” Meta CEO Mark Zuckerberg said during Meta’s third quarter 2023 earnings call. “So those are the deals that we intend to be making, and we've started doing that a little bit.”
While Zuckerberg said he doesn’t think those deals will contribute much to Meta’s revenue now, the CEO said he hopes it can in the long term.
Shares of Meta are up 85% over the last 12 months, compared to Microsoft and Google, which are up 25% and 18%, respectively. Analysts say the company’s shares are priced well relative to earnings, but the promise of how AI will boost the social media company’s own products could prove to be a tailwind.
Meta’s competitors aren’t sitting idly by
Meta’s open-source family of models may give it a competitive edge, but that doesn’t mean it’s going to knock OpenAI, Google, Microsoft, Anthropic, or any of the host of other companies fighting for position in the AI wars out of the game.
“It's competitive in the sense that it's a great, cheap alternative for developers,” Munster said. “It's the most advanced, cheapest alternative.”
And just as Meta’s models continue to evolve, so do its competitors'. Rivals OpenAI and Anthropic have funding deals with Microsoft and Amazon (AMZN), respectively, that give them the cash they’ll need to grow over the years.
Google also has the benefit of being able to offer its Gemini platform on hundreds of millions of Android smartphones around the world, while OpenAI is expected to land on iPhones via Siri in the coming months.
And although consumers will be able to use Meta’s AI services via its family of apps, users will find it easier to call on an AI assistant that’s built into their devices rather than having to open up a third-party app.
Still, with more than 3.27 billion daily active users across its family of apps, Meta has plenty of opportunities of its own.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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