Just a day after a report emerged that Meta Platforms wants to build a cloud business to sell excess artificial-intelligence computing power, Japan's SoftBank has announced it is piling into the space.
Meta stock got a significant one day boost after the report -- which is yet to be confirmed -- but there are two important questions. First, whether it has any additional capacity to sell in time to capitalize on the hot market, and secondly, if SoftBank's move points to possible market saturation.
Investors had welcomed the prospect of immediate returns on Meta's huge AI spending from cloud revenue as the stock gained 8.8% Wednesday. Shares were broadly flat in the Thursday premarket.
But it's not clear how quickly Meta would be able to free up any AI computing power to sell to the market.
"The problem here is that Meta doesn't currently have any spare capacity to sell and has been unable to purchase the capacity from Google that it needed," wrote independent analyst Richard Windsor, who publishes the Radio Free Mobile blog. "This means that it will have to park its development of superintelligence and AI in its apps to free up capacity to sell to everyone else and Anthropic in particular."
At the moment the market for AI computing power is hot which is will be why companies like SoftBank are already swooping in to take advantage. Its announcement says it intends to operate a neocloud business in the U.S., tentatively named SB Neo.
"SB Neo will launch neocloud services that provide major U.S. enterprises, including hyperscalers, with the computing resources needed for large-scale AI model training and inference," SoftBank said in a statement. "To meet the strong demand for AI computing resources in the United States, SB Neo will expand its service capacity in phases, with plans to later deploy AI infrastructure on a 10-gigawatt scale."
Meta's pivot could also complicate its relationships with existing neoclouds CoreWeave and Nebius which face the prospect of a major customer becoming a competitor.
Meanwhile there are other unanswered questions for Meta. Operating a cloud might require building more data centers, adding to Meta's already surging capital expenditure. Meta plans to devote up to $145 billion toward capex this year.
"Building data centers is operationally very difficult and hugely capital-intensive. As a Meta shareholder, I'd rather see them continue with open models and monetize AI through products and services with much higher margins than get into the brutal battle of building data centers in places like North Dakota," said Paul Meeks, head of technology Research at Freedom Capital Markets.
Meta got a nice one-day boost from the cloud-computing plan report but it remains to be seen whether it can turn it into more than that.
