Meta building cloud business to sell excess AI capacity

https://www.reuters.com/business/meta-sell-excess-ai-computing-capacity-via-cloud-business-bloomberg-news-reports-2026-07-01/

by mgh2 • 21 days ago

30 66 21 days ago

reuters.com

_heimdall• 21 days ago

For one thing, I still don't understand Meta as a business. It seems like Zuck refused to accept owning a boring ad business and keeps trying to act like a tech business.

For another, this seems like a move that happens when the bubble pops.

The dotcom bubble went from having tons of business raising fortunes on the promise of business models the internet unlocks to having few internet businesses left at that scale and a bunch of unused fiber.

Now we're starting to see all the companies claiming AI products will make fortunes to them trying to sell unused hardware capacity.

spacington• 21 days ago

He just has that much money and his 'whatever ecosystem this is' continues to work, it has to be a kind a playground for him.

He could invest in paying back society but he cares more about continuing his ignorance.

Just imagine how his ego got stroked when he was agreeing with trump like a bootlicker but still sitting at a table at the Whitehouse.

Even with this clown this has to count for something in his books.

rwmj3• 21 days ago

The difference is the hardware will become obsolete in a few years, unlike the dark fibre (really, rights of way) that provided cheap connectivity for years after the crash.

cyanydeez• 21 days ago

not if they completely crash manufacturing with their push for fascism; be more optimistic!

johndhi3• 21 days ago

It's obsolete for training but is it obsolete for inference?

bwb3• 21 days ago

Do we have any good data on how many of the GPU burn out given hard usage?

Are we talkinga bout loosing 50% of the hardware as it fails? Or far less?

Traster2• 21 days ago

The hardware will become obsolete but we may end up with an oversupply of cheap power - overbuild on things like Nuclear and solar. That would be nice.

tacker2000• 21 days ago

Unfortunately he has too much cash since he owns some of the largest social networks and thus receives insane amounts of ad spend… this will not end soon

jordanb• 21 days ago

And he can't be fired by shareholders.

gloryjulio3• 21 days ago

For one thing, I still don't understand Meta as a business

Zuck got spooked by apple ads change a few years ago, which crashed the meta's stock to double digit. So Zuck is trying to own a platform. They want to be a version of openai selling ads

johndhi3• 21 days ago

Good take! I buy it.

eiejee3• 21 days ago

Actually his basket case investments with VR is what led to a loss of investor trust

zaphirplane• 21 days ago

How is that different from Facebook

kombookcha2• 21 days ago

This is an interesting angle. I had not considered how fundamentally exposed Meta is, should Apple and Google decide to break omerta.

re-thc2• 21 days ago

It seems like Zuck refused to accept owning a boring ad business

Zuck sees a real problem: not owning the platform.

Hence the VR and other attempts. He sees what he has today as a dead end. The fear grips him.

In theory Google and Apple could ban Meta’s apps and it would be game over.

eiejee3• 21 days ago

lol that’s charitable

The real problem for Zuck is he thinks he’s some grand master who can play 5-d chess, except he can’t

cmiles84• 21 days ago

It’s a pretty consistent story in tech. Meta built a successful ads platform. That success went to their head and the company starts acting like it’s just great at tech and innovation and tried to do a bunch of other stuff. Turns out it’s pretty crap at most other things and can’t figure out how to make money from anything other than selling ads. Company is very headstrong and refuses to admit it’s just not good at other stuff. It has enough cash from ads to not go bankrupt and so just carries on with this nonsense on cycle after cycle of crazy side projects that go nowhere.

mrweasel• 21 days ago

He might be scared that his ad business won't be as profitable in a few years. He'll still be rich, but perhaps that's not enough for him. He has all the correct number and knows exactly how many of their users are bots and how much of the ad revenue comes from scams. Maybe he sees a potential risk that we can't.

Could also be a self-image thing. Facebook isn't exactly young and fashionable anymore, it's more akin to a weird mid-90s idea of a close walled Internet in some sense. Instagram users I'd guess is mostly younger women. None of these really align with Zuckerbergs macho persona.

emsign• 21 days ago

Excess AI capacity? Huh? Wait a minute does that mean they've built more data centers than there's demand for? Oh! How did that happen? Well, I'm a complete idiot, a layman, not even a developer, what do I know about economics and technology...

ianm2182• 21 days ago

It’s a hard thing to measure right? Google under bet on demand for their AI infra and left lots of money on the table with Anthropic/ has to buy computer from SpaceX for awhile, Meta over built.

jgalt212• 21 days ago

Meta over built.

In retrospect, this seems pretty easy for Meta to have done as heretofore they were a single captive customer AI shop.

fghorow• 21 days ago

"Bubble? What Bubble? I don't see no steenkin' Bubble."

Sol-2• 21 days ago

xAI has shown this to be quite lucrative. And it seems to even make some sense - if the contract can be ended on relatively short notice, you basically have the capacity on stand-by if you ever need it yourself (accumulating GPUs is not trivial), but can monetize it if you don't need it.

Though it's probably a bad sign generally that you can't capitalize on all the GPUs you've acquired.

re-thc2• 21 days ago

xAI has shown this to be quite lucrative

Come back when you have actual numbers on dollars spent, interest rates and the time spent.

disgruntledphd22• 21 days ago

To be fair to meta, they've been running data centers for almost two decades now, so they'd be in a different position to XAI.

khurs4• 21 days ago

xAI has shown this to be quite lucrative.

The demand is likely short term till the renter can ramp up their own centres/find better deals.

InsideOutSanta2• 21 days ago

xAI has shown this to be quite lucrative

How do you know this? Have they released any numbers?

Sol-2• 20 days ago

I think the SpaceX IPO showed them to rent the clusters for billions a month

rightbyte2• 20 days ago

(accumulating GPUs is not trivial)

Also like accumulating milk rather than gold.

A approximate failure rate I have been able to find is: https://www.tomshardware.com/tech-industry/artificial-intell...

Which would imply 42% loss over 5 years if linear attrition at 10% failure rate per gpu year.

(((1-(148+72+19+17+6)÷16 384)^(1÷54))^(365)

Dunno how many faults are repairable in practice. The failure rates of CPUs were alot lower for comparison.

wmf2• 20 days ago

Newer generations are supposed to be more reliable. You're also not counting warranty replacement.

SilverSlash2• 21 days ago

So have they just given up on llama then? What happened to the 25 year old Zuck paid $250M for?

raverbashing• 21 days ago

Probably got laid off already

khurs4• 21 days ago

25 year old has been doing the rounds giving podcast and other interviews so you can listen to him.

pavlov• 21 days ago

If you mean Alexandr Wang, the number is off by an order of magnitude. Forbes estimates he made over $3 billion from selling his startup to Meta and getting hired as chief AI officer.

SilverSlash2• 20 days ago

Nah, it's a guy named Matt Deitke and he was 24 at the time.

wmf2• 20 days ago

Muse Spark.

cmiles84• 21 days ago

So like likes of AWS are spending crazy sums building capacity citing amazing demand they can’t meet. Meanwhile those with capacity are saying hey maybe we don’t need so much and are building cloud businesses to compete with AWS and flood the market with excess capacity.

Oh yeah, this is gonna end well.

johndhi3• 21 days ago

I don't really think this necessarily means demand is limited.

It just means demand is consolidating to winners. There's no denying openai and anthropic and maybe Google have a ton of demand. The fact that xai and meta do not does not mean no demand exists.

cmiles84• 21 days ago

Everyone slamming the brakes on tokenmaxing and companies putting strict AI budgets in place is surely having at least some impact on demand.

And the point is not that “no” demand exists but the likes of AWS are building to the moon citing massive future need but that simply doesn’t jive with all this unused capacity from others coming to the market.

And building out massive capacity to sell a product that’s likely to trend to a low margin market commodity isn’t a great business.

Jordanpomeroy• 21 days ago

Most of the demand for data center GPUs comes from the big tech companies themselves, to develop products/services.

Facebook and Twitter are both now signaling that the resources they funded with vast amounts of capital would be worth more to shareholders if they were leased to the highest bidder.

This is either a realization that their internally developed product/service roadmap is not panning out, or that the lease demand is so high that they’d be fools not to take advantage.

nicce• 21 days ago

Oh yeah, this is gonna end well.

Hope so. It also would put hardware prices down.

khurs4• 21 days ago

Good news. The more providers, the more competition and lower prices.

Meta are laying their own sub-sea cables globally at present:

https://www.bbc.co.uk/news/articles/ckgrgz8271go

XorNot• 21 days ago

In the grim darkness of the AI boom everyone is watching high profitability industries move into areas characterized by having few providers due to incredibly poor margins and high expenses and declare it business genius.

khurs4• 21 days ago

AWS have 35% profit margins.

Google Cloud recently told Meta they couldn't supply all the ai compute they want so Meta has no choice but to secure their supply?

https://memeburn.com/google-limits-metas-gemini-ai-access-as...

iamacyborg• 21 days ago

And much like the 41st millenium, there are no good guys, just the eternal laughter of hungry shareholders.

TYPE_FASTER• 20 days ago

Are we watching the next sacrificial infra build-out happen (Global Crossing/Iridium), where eventually a bankruptcy will lead to affordability? Is this an artificial semiconductor demand peak with rapid expansion due to business FOMO? Will semi manufacturing ramp up to meet this peak, leading to a glut? Will this be like the pandemic supply chain whiplash impact on outdoor gear (Kona Bicycles at one point was offering a BOGO deal)?

dachworker• 21 days ago

I'm excited for the opportunities that an abundance of compute brings, even in the absense of AI applications. Big compute is the right direction, if we can afford it. There are always things to simulate or discover or automate in some way shape or form.

newsclues• 21 days ago

Big computer isn't the right direction if we have to sacrifice LOCAL COMPUTE for the big cloud future.

Traster2• 21 days ago

I think we're going to look back on this as one of the things that really exacerbates this bubble. It's one thing for these companies to have high expectations of their future compute needs and therefore overbuild. But what the SpaceX/Anthropic deal showed was even if you fall short, you can profit by selling off your overcapacity. This means there is essentially no incentive to limit how much capacity you're building, anything you don't use you'll still profit from.

The problem is that only works if aggregate demand is higher than supply. At some point, all these new data centres are going to come on line, and the frothy "throw AI at everything with no regard to costs" is going to drawn down across the industry. And this supply will be much larger - because everyone thought the down side was limited.

At that point you're going to have all of these companies trying to dump their excess capacity on the market and it suddenly won't be true that you can just sell capacity to your competitors.

Obviously this won't bankrupt Meta - it'll just eat into their profits from their ads business. But it likely will drive a bunch of neo-clouds out of business very quickly, and the technology providers like Nvidia etc will suddenly come back to reasonable P/Es.

dotcoma2• 20 days ago

But what the SpaceX/Anthropic deal showed was even if you fall short, you can profit by selling off your overcapacity.

Do you have proof that the deal is profitable (and for how long?) for SpaceX ?

dotcoma2• 20 days ago

Meta is just another company that, like xAI/Grok, is at last starting to face reality: there are going to be two or three winners in this space, and they are not one of them.

ChrisArchitect• 20 days ago

[dupe] Earlier on source: https://news.ycombinator.com/item?id=48745966

Meta building cloud business to sell excess AI capacity

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