Meta emerged as the top performer within the S&P 500 on Friday, as investors expressed enthusiasm over the social media giant’s efforts to capitalise on its AI investments. In an internal memo, Meta outlined plans to double its cloud computing capacity to 14 gigawatts next year and commence the production of its own AI chips in collaboration with designer Broadcom starting in September, as reported. On Thursday, Meta unveiled its latest AI model, Muse Spark 1.1, which developers can access for a fee via a new API platform. The shares experienced an increase of 6% on Friday, following a nearly 5% rise the previous day. Meta stock entered this week with a decline of 12% since the beginning of the year. Friday’s gains offset those losses, resulting in a year-to-date increase of 1% in shares.

Wall Street has begun to scrutinise Meta’s expenditures on AI infrastructure this year, with certain investors voicing apprehensions that the social media behemoth is allocating hundreds of billions towards data centers for its own operations, in contrast to Alphabet and Amazon, which monetise computing capacity by offering it to cloud clients. Meta has been among the underperformers in the Big Tech sector this year. It was the sole stock among the Magnificent Seven to experience declines in both the first and second quarters. Its 15% decline in the first half was the second-worst among the Mag Seven, surpassed only by Microsoft’s 23% drop. Sentiment has shown a notable improvement in the latter half. Shares surged 9% on July 1 after reports emerged that the company is contemplating leasing its surplus computing capacity to external parties, akin to SpaceX’s $1.25 billion-per-month arrangement with Anthropic. Shares have increased by nearly 20% since the release of that report.

Bank of America analyst Justin Post, in a note earlier this week, contended that Wall Street is underestimating the value of Meta’s AI infrastructure. Post estimates indicate that investors are valuing Meta’s computing capacity at merely $4 billion per gigawatt, in contrast to Amazon’s $59 billion and Alphabet’s $110 billion. Post estimates a valuation of $12 billion per GW, “significant upside considering specialized AI capacity that Meta is building.” According to Post, SpaceX’s recent agreements with Anthropic and Google have appraised its specialised capacity at approximately $50 billion per GW. Investor enthusiasm for Meta’s AI initiative has counterbalanced the regulatory and legal challenges confronting its primary social media operations. The EU Commission on Friday released a preliminary report indicating that Meta has breached its Digital Services Act by incorporating “addictive” features such as infinite scroll and autoplay.

The commission instructed Meta to amend the infringing design features, or face the possibility of a penalty amounting to 6% of its worldwide revenue. Meta is encountering increasing examination regarding its social media platforms and their effects on the mental health and safety of young individuals. The company experienced setbacks in two trials focused on child safety earlier this year, which could establish a precedent for numerous similar cases currently in litigation.