Nasdaq moves lower after Meta announces it has capitulated in the race to build a leading frontier LLM it is to build a cloud business to sell its excess AI compute, weighing on cloud peers like AMZN, ORCL, MSFT, neoclouds like Coreweave and Nebius (who will now be racing to the bottom for customers) and chip and memory names like NVDA, MU, INTO, as demand for their products is now likely to be much less thanks to the excess META capacity on offer.

As Bloomberg reports:

Meta, which has been rushing to secure expensive data centers and other infrastructure to fuel its own artificial intelligence ambitions, is forming a business to generate revenue from excess computing power sold to outside customers, according to people familiar with the matter, who asked not to be named as the details aren't public.

One potential plan includes selling access to various AI models that are hosted on Meta's existing AI infrastructure, an approach similar to AWS's Bedrock offering, the people said.

Meta would run the data centers and chips that power the models, including its own Muse Spark models, and charge developers to access them.

The report also notes that the company is considering selling access to "raw" computing capacity, taking a chunk out of the business of neoclouds like CoreWeave. Ironically, META just signed multi-billion deals with CoreWeave and Nebius, and now it is turning around to compete with the very suppliers it is paying. 

Development of these new business lines is part of Meta Compute, an internal initiative to build and manage the company's AI infrastructure efforts, according to a person familiar with the plans. Meta Compute is led by Santosh Janardhan, Meta's head of infrastructure; Daniel Gross, a leader inside the Meta Superintelligence Labs AI unit; and Meta President Dina Powell McCormick.

Despite the complexities, Meta Chief Executive Officer Mark Zuckerberg has signaled to investors that he's open to selling excess computing infrastructure, or even a so-called API service where customers would pay for AI usage — a business that's usually measured in "tokens," or the amount of data used and generated for a customer query.