Meta (META) announced it will expand its AI infrastructure through 350,000 Nvidia H100 AI GPUs (NVDA) by the end of the year. Considering the average price tag of $30,000 per GPU (graphics processing units), the cost of that investment would be about $10.5 billion. What does this mean for those who invest in Meta or AI overall?

KeyBanc Managing Director Justin Patterson joins Yahoo Finance to discuss what investors should be on the lookout for when considering investments in Meta, AI, and beyond.

Patterson explains what investors should expect from Meta CEO Mark Zuckerberg: "One would be just fleshing out this AI strategy some more, so Mark in his comments teased, expect more to come. We will have the latest model Llama 3 being worked on over the course of the year. There was some teasing of more connected devices in there." He continues "The other side would just be, what is the health of the core ad platform right now? It does look like the ad market is continuing to recover in Q4, we've seen some positive preannouncements to start the year."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: Meta doubling down on artificial intelligence. CEO Mark Zuckerberg announcing the tech giant is pushing deeper into AI, and it's going to require quote, "massive compute infrastructure." And that means that Meta is going to build all this out using 350,000 graphic processing units, GPUs, from NVIDIA.

And taking a look at share reaction here this morning, about 15 minutes into the trading day, you're looking at gains just about 1.5%. We want to bring in Justin Patterson, he's KeyBanc's Managing Director. Joining us now with more.

Justin, let's talk a little bit first just about what exactly this could mean for the stock price here for Meta going forward, because we know this is a name that certainly rebounded in 2023. Shares up about 180% in just the last year. So how big of a catalyst do you see these AI plans are being for the stock?

JUSTIN PATTERSON: Yeah, it's a great question. When you look at 2023's performance, a lot of that was the year of efficiency costs coming out of the business. Yes, you had some revenue re-acceleration from reels, from currency in the back half. But as we look at 2024, this year is really more about revenue growth.

So when you see these AI investments coming to the business, that's something that drives engagement on Meta, position some new revenue streams, pricing growth from the ad side, and really starts to position Meta more as a competitor in that conversation with OpenAI and Google. So we're pretty bullish on Meta's AI moves here.

BRAD SMITH: I mean, coming off of a year of efficiency, I mean, they can't that quickly just go to a year of making it rain on AI, right? So what is the best way that investors can anticipate and kind of encapsulate how Meta Platforms is going to really give or set a theme for this year?

JUSTIN PATTERSON: It's funny you say making it rain. They were already making it rain last year. You had a roughly $28 billion in CapEx, you already have guidance for $30 to $35 billion. That's a lot of that AI investment. So we're going from-- call it slight downpour to a bigger rainstorm this year.

And you've seen some of that already happen within the AI-- within the adtech stack, where revenue growth started accelerating to 20% growth. A lot of that has been some of this AI investment driving better content recommendations, which leads to more time spent within reels and also gives more time, more opportunities to serve ads and drive that ad growth. So I think of this more as continuation of revenue growth, sustaining some of that initial foundation built in 2023.

SEANA SMITH: Just looking ahead to the fourth quarter results that we're going to be getting here in just a couple of weeks, when it comes to AI initiatives, when it comes to some of Meta's other top priorities here for the coming year, what's the top thing, or maybe top two things that you're going to be hoping to hear or want to hear from Zuckerberg?

JUSTIN PATTERSON: Yeah, so one would be just fleshing out this AI strategy some more. So Mark, in his comments yesterday, teased expect more to come. We will have the latest model Llama 3 being worked on over the course of the year. There was some teasing of just more connected devices in there. It sounds like the Ray-Ban product's going pretty well. So just how he's thinking about which inning of the AI investment we're in, what initial returns look like, so on and so forth. So I'd call that the AI bucket.

The other side would just be what is the health of the core ad platform right now. It does look like the ad market continue to recover in Q4. We've seen some positive pre-announcements to start the year. So this is another year where Meta is putting up, call it mid-teens growth, since you've got tough comps in the back half. That'll be perceived as positive for investors.