What’s going on here?

Forget seeking dinner dates and expensive presents: Nvidia might’ve found a fruitful, rewarding partnership in Meta’s artificial intelligence project.

What does this mean?

Meta’s no stranger to making extravagant purchases, pouring billions into big bets like the metaverse as if it was handing over $6 for a coffee. Well this year, Meta’s chosen Nvidia’s chips – the type that can power AI systems – as its latest fascination. In a bid to steal a march on other high-tech competitors, Meta indicated that it’ll be buying 350,000 top-of-the-line chips. They don’t come cheap, though: in fact, they’re swapping hands for up to $40,000 on the second-hand market. And even if Nvidia charges Meta half of that, the deal could make the chipmaker close to $10 billion in revenue from Meta alone this year.

Why should I care?

For markets: Budgeting pays off – except this time.

Meta’s spending habit hasn’t gone unchecked. Against the threat of a recession, the company slimmed down the funds it funnels into visionary projects, focusing instead on lowering costs to maximize profit. That discipline paid off – literally: Meta’s profit margin and stock price both benefitted. But this spree will be given a pass. Investors are more sold on AI’s potential than they ever were with the metaverse, so they’ll likely overlook the break in frugality if it means owning a chunk of a potential AI trailblazer.

Zooming in: Gossip can be valuable.

It’s not every day that investors get eyes on companies’ detailed spending plans. And they’ll be especially glad the release centered around Nvidia: the chipmaker ran the stock market last year and is tipped by analysts to double its revenue this year, so investors are looking for any clues that could support or undermine that prediction. If Meta does go through with those plans, it won’t take too many more Meta-sized orders for Nvidia to live up to expectations.

Source: Bloomberg