Meta’s AI Spending Pays Off

0:00Voices are powerful things. At Vanguard, investors are also owners and their voices are heard. And now with Investor Choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, which are owned by Vanguard's fund shareholder clients. To learn more, visit Vanguard.com. All investing is subject to risk. Vanguard Marketing Corporation Distributor. Figure as of January 2025.

0:32FBI agents search a Georgia election office, part of a push to re-examine Trump's 2020 loss. Plus the backstory on the Metals rally that just won't quit. And investors reward Meta for growing its digital ad revenue as big tech's AI costs pile up. 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. 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.

1:16Gold has hit another record high, topping the$5 ,500 mark for the first time as the rush to precious metals continues. After recording its strongest annual performance since 1979 last year, the World Gold Council said the 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 Quinton Webb says the run-up in prices means a lot of different investors are trying to get in on the trade. 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.

1:58So 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 apps. 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 and gold miners, of course, but that's a less pure exposure to the gold price. And Quinton says that an unlikely crossover with crypto is adding to gold's luster too.

2:32Tether 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 months is probably another reason that's helping sustain the gold price. And gold isn't the only metal hitting new records this morning, with silver, copper, and palladium all rallying too.

3:06Tech 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's fell. Joining us to dissect the themes cropping up across this earnings season so far is State Street Investment Management's Altaf Qasim. 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.

3:45It's really going to play out through 2026. Why, then, the mixed reaction on Wall Street? 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. I mean, is the difference here, digital ad spending targeting consumers versus AI spending for the purposes of enterprise products?

4:26Yeah, 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 front loaded, 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. Althoff, I'm just thinking about Meta and its digital ad business, a real cornerstone for the company.

5:02How relevant is it that consumers seemingly have been as receptive as they've been to AI images and marketing materials? Obviously, we know creators have chafed at this, But it's a tailwind for businesses that have gone big on AI image creation if they can normalize this within the ad space. Yeah, I think that's the marketing dream, right? It's that everyone gets their own targeted personal ad, and it's becoming a reality through AI. I don't think consumers are pushing back. The results certainly don't show this. And in the U.S., which is the biggest market, the consumer spending is still strong.

5:34So I think you're right. There's a couple of tailwinds there. Tesla reported results last night. CEO Elon Musk announced on an earnings call that the company would be canceling its Model S and Model X EVs and converting some factory space in California to making Optimus robots. It's slightly sad, but it is time to bring the SX programs to an end and it's part of our overall shift to an autonomous future. Sure. Althoff, we are not here to discuss how sad this pivot might be, but it raises the question, if investor patience is already being tested by the lack of revenue from some AI spending around the LLM build out, is spending big now on a slightly more distant autonomous future going to be a harder pill to swallow?

6:26When you think about the layers of AI, we've had receptive AI, generative AI, which is basically LLMs, and everyone's talking about agentic AI. And then you've got physical AI, which is things like robots. And you're right, that's further out in the future. But it has a lot of promise. Again, I think the same story is going to have to apply. It's going to have to be about monetization and showing that it can justify the spending that's been put into it. So it is another long horizon story. And again, the market tends to be a bit more short-sighted these days when it sees the numbers that are going into capex.

6:59Althoff, one undisputable bright light so far this earnings season has been chip demand. We saw this in SK Hynix's results and ASMLs and Samsung's. How long can companies across the semiconductor supply chain keep having these blockbuster quarters if the thus far deep-pocketed hyperscalers are still sorting out how to make a profit off of AI? Yeah, I think it's definitely, you know, when we talk about deep pockets, what the market has been comfortable with so far is that a lot of this investment has been self-financing. It's been coming from the huge cashflow piles that these companies have had and they've been chucking off cash and using it to invest.

7:35Where the market gets less comfortable is when we have leverage, when we have this circular financing. So showing that AI can pay for itself, you get a big tick. If you're saying, well, we have to raise debt or we have to get an investment from another company that's effectively in the same business or in the same vertical, that makes the market a lot more nervous. Altaf Qasim is the European Head of Investment Strategy and Research for State Street Investment Management. Altaf, thank you so much for being with us on What's News. Thank you, Luke. Coming up, the rest of the day's news, including a pair of health updates as U.S.

8:08life expectancy ticks higher after the break.

8:15Voices are powerful things. At Vanguard, investors are also owners and their voices are heard. And now with Investor Choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, which are owned by Vanguard's fund shareholder clients. To learn more, visit Vanguard.com. All investing is subject to risk. Vanguard Marketing Corporation Distributor, figure as of January 2025.

8:47FBI agents have searched the main election office in Fulton County, Georgia, seeking records related to the 2020 presidential election. The Trump administration is stepping up efforts to re-examine the president's loss to Joe Biden, with Trump promising last week that, quote, people will soon be prosecuted. Trump has repeatedly alleged that Fulton County produced fraudulent results and urged various officials, including Georgia's secretary of state, to help find enough votes to overturn his narrow defeat in the state. Rob Pitts is the chairman of the Fulton County Board of Commissioners, heard here courtesy of Atlanta News First.

9:24For the life of me, I still cannot understand the fascination about the 2020 elections which occurred six years ago. That election is over with. That election has been reviewed. It's been audited. And in every case, every instance, we get a clean bill of health. Georgia election officials conducted two recounts that confirmed Biden's victory in the state, and no court or election authority found evidence of widespread fraud in the presidential election. Life expectancy in the U.S. reached a record high in 2024, with Americans now living 79 years on average. That follows the largest year-to-year drop in deaths stemming from drug overdoses, with the National Center for Health Statistics saying they decreased by more than 26 percent between 2023 and 2024.

10:14The increase in life expectancy signals a rebound from declines during the coronavirus pandemic and progress in tackling the opioid crisis. And finally, enthusiasm for GLP-1 weight loss drugs like Wegovi and Ozempic isn't letting up. Nearly one in five Americans have now tried them amid a marketing push, pitching them as lifestyle fixes. But journal health columnist Sumathi Reddy says that obesity doctors and researchers find that messaging problematic, as new research confirms that the drugs were designed to be lifelong treatments. So a recent study found that when people stop taking a GLP-1 drug, they're regaining all the weight they lost back within about 1.5 years.

10:57Now that's four times faster than people who are losing weight through exercise and diet changes. Another thing to know is that any sort of improvements in things like cholesterol and blood pressure, those are completely reversed when you stop taking a GLP-1 drug, basically at the same time as you're regaining that weight. Almost every doctor says a GLP drug is a successful intervention for most people. Most obesity doctors will say that these are designed for people with a disease and they should be basically taken forever. And on average, most people are going to regain the weight when they stop them.

11:30But one doctor I talked to said, you know, any sort of time spent at a lower weight they think, you know, is ultimately beneficial to your health. And to read more about what happens when you stop taking GLP-1s, check out the link we've left in our show notes. And that's it for What's News for this Thursday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer was Sandra Killhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

12:06Voices are powerful things. At Vanguard, investors are also owners, and their voices are heard. And now with investor choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, which are owned by Vanguard's fund shareholder clients. To learn more, visit Vanguard.com. All investing is subject to risk. Vanguard Marketing Corporation Distributor, figure as of January, 2025.