Facebook: Meta announces further data center expansion plans despite share crash

Oct 31, 2022 | Posted by MadalineDunn

Since Facebook became Meta, the company has tanked, losing $650 billion. In the wake of this huge loss, on Thursday, the giant's shares crashed 24% to $97.94, which is reportedly the lowest in nearly four years. This follows its historic loss in market value back in February, which saw $200billion erased and an increasing number of users departing the platform. A recent leak also revealed that Metaverse has a "serious user retention problem." However, despite this huge loss and the company's inability to attract new users and retain old ones, it has outlined that it will continue to invest in data center infrastructure, with capital expenditures expected to reach in the range of $34 billion to $39 billion next year, with servers and network infrastructure contributing to a significant portion of this. Elsewhere, it is planning to reduce costs, especially with regard to headcount and office footprint.

According to Meta's chief strategy officer Dave Wehner, it is significantly expanding its AI capacity and the investments are "driving substantially" all of its capital expenditure growth in 2023. He said: "There is some increased capital intensity that comes with moving more of our infrastructure to AI. It requires more expensive servers and networking equipment, and we are building new data centers specifically equipped to support next-generation AI hardware." Wehner went on to explain that the company is also making ongoing investments in its data center footprint, explaining, "we have stepped up our investment in bringing more data center capacity online," and that this is "ongoing in 2023."

He added: "We believe the additional data center capacity will provide us greater flexibility with the types of servers we purchase and allow us to use them for longer, which we expect to generate greater cost efficiencies over time."

However, this spending spree has been met with criticism from Meta shareholders, with CEO Mark Zuckerberg's actions being called "tone-deaf" to the investment community. Steve Diamond, Associate Professor of Law at Santa Clara college legislation faculty, said that he was "astounded" by how much has already been injected into the Metaverse, considering they have "little to show for it."

Jim Tierney, chief funding officer for US development at AllianceBernstein, a Meta shareholder, echoed this and said: "If any other company had done this you'd have activist investors writing letters, proposing alternative slates of directors, demanding change. I think Mark heard crystal clear what investors wanted. He's made his decision."

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