We have trimmed META (NAS:META). It is up 175% since our initiation report in March 2022 (report here). We added to our position in November 2022 as a myriad of fears drove META down 50% from initiation (here).
META is a compelling reminder of how inefficient markets can be. In the span of a little over a year, narratives have reversed for META in almost all domains: Contrary to earlier apprehensions, META has weathered the Apple Ad Tracking Transparency storm and now has record engagement and ad revenues; TikTok fears have diminished as the platform has increasingly become a focal point of geopolitical tension; Mark Zuckerberg has gone from being perceived as a capital incinerator to being recognized as an astute capital allocator, with many of his AI related investments now being praised for their prescience; And lastly, Reality Labs has gained investor confidence as Apple has stepped into the arena, validating the virtual reality sector.
Our decision to trim our position in META is motivated by its large portfolio weighting. We maintain a positive outlook for META, anticipating that its continued investment in AI will further enhance user engagement through improved recommendation algorithms and ad targeting efficiency. META boasts one of the leading AI research laboratories, one of the largest assemblies of GPU computing power (with the latest count reaching 600,000 H100 GPUs), and one of the most valuable data repositories. Their other strategic initiatives are also to pursue building their own custom silicon (to drive more efficient computation) and to lower the cost of creating content by open sourcing their models such as LLaMA. With reach to 3B pairs of eyes, META’s acceleration is still in the early innings.
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