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MoffettNathanson analysts believe there could be a slowdown in Meta Platforms Inc’s (NASDAQ:META) CapEx spending.
They said in a research note that while for the past six months, the market has been focused on the operational inefficiency of Meta, the same attention should be given to Meta’s cash flow statement, which “appears burdened by an enormous and perhaps inefficient use of capital expenses over the past few years.”
After comments by Meta’s new CFO, Susan Li, that the company is going to optimize its approach to building data centers, the analysts said the company is embracing a modular, or just-in-time, construction strategy.
“This entails first building a data center’s shell, which is relatively inexpensive, and then fitting out the interior with expensive power, cooling, and other systems in phases as needed,” explained the analysts. “Meta will thus be able to stagger its capex to align with demand rather than leaving capital stranded. This is an intelligent change on Meta’s part. But it’s a construction strategy that third-party data center operators have universally embraced for, oh, roughly the past decade.”
They believe there is a growing conviction that the “spike in CAPEX tied to the emergence of short-form video content powered by AI might start to level off – as the company has promised – in the near term.”
