Meta’s AI Spending Pays Off

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Luke Vargas (0:34)

FBI agents search a Georgia election office, part of a push to re-examine Trump's 2020 loss, plus the backstory on the medals rally that just won't quit. And investors reward Meta for growing its digital ad revenue as big tech's AI costs pile up.

Altaf Kassam (0:52)

The market is getting increasingly worried that this massive spending is needing to deliver results now. And advertising is one of the easiest and quickest ways to monetize that with the promise of more to come.

Luke Vargas (1:03)

It's Thursday, January 29th. I'm Luke Vargas for The Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today.

Gold has hit another record high, topping the $5,500 mark for the first time as the rush to precious medals continues. After recording its strongest annual performance since 1979 last year, the World Gold Council said that global demand for the safe haven asset is expected to remain strong this year, driven by lower interest rates and persistent geopolitical risks. Deputy Finance Editor Quentin Webb says the run-up in prices means a lot of different investors are trying to get in on the trade.

Quentin Webb (1:48)

We've had this long spate of elevated buying by global central banks because in many cases they would like to reduce their dollar dependence and put more of their reserves into another alternative asset. These things are all together combining to help support gold and to create this upward push in gold prices. In the last few years, we've seen the emergence of gold ETFs, which now manage many billions of dollars and you can effectively buy those at the click of a button in your brokerage app. So certainly people are not just buying gold bars and stashing them in vaults. People are increasingly buying gold ETFs or alternatives such as buying shares in gold miners, of course, but that's a less pure exposure to the gold price.

Luke Vargas (2:28)

And Quentin says that an unlikely crossover with crypto is adding to gold's luster too.

Quentin Webb (2:34)

Tether has emerged as a significant buyer of gold, partly for a recently launched gold-backed stablecoin that it has. But also, you know, don't forget that Tether commands a huge sum of assets because of its major stablecoin which is tied to the dollar. So that extra buying in the past month is probably another reason that's helping sustain the gold price.

Luke Vargas (2:57)

And gold isn't the only metal hitting new records this morning, with silver, copper and palladium all rallying too. Tech giants Meta and Microsoft reported earnings yesterday. Both results topped analyst expectations, with Meta posting record Q4 sales growth and Microsoft blowing past net income forecasts. But what ensued was a tale of two very different investor responses, as Meta shares popped in off-hours trading while Microsoft fell. Joining us to dissect the themes cropping up across this earnings season so far is State Street Investment Management's Altaf Kassam. Altaf, Meta and Microsoft are both spending big on data centers, building out their respective AI capabilities, and both also signaled yesterday that trend is not going to end. It's really going to play out through 2026 Why then the mixed reaction on Wall Street?

Altaf Kassam (3:52)

The big difference was that one company was able to show that it was monetizing the huge spend in capex on data centers and other sorts of AI infrastructure. And the other one was actually showing slowing growth in cloud computing, which is one of its core capabilities. So it's a story of the spending was always expected to be increasing, but the monetization was what the market was looking for. And it happened in one company and not the other.

Luke Vargas (4:18)

I mean, is the difference here, digital ad spending, targeting consumers versus AI spending for the purposes of enterprise products?

Altaf Kassam (4:27)

Yeah, I mean, there's a very clear differentiation between consumer and enterprise here. The market is getting increasingly worried that this massive spending, which has all been frontloaded, is needing to deliver results now. And they've rewarded the companies that have shown that the money is coming through right now. And advertising is one of the easiest and quickest ways to monetize that. Whereas with enterprise applications, it feels like it's still tomorrow, tomorrow, tomorrow. And the market is becoming impatient. And I think that's why the stock was punished.