When we think of Meta (META), you might think of Facebook, Instagram or, shudder, the metaverse. But the social media company has quickly become an artificial intelligence darling, along with OpenAI, Microsoft (MSFT) and Google (GOOG, GOOGLE).
Meta’s AI success comes from its Llama family of models, which the company releases across its various social platforms, including its Meta AI assistant for Facebook, Instagram and WhatsApp. Businesses also put Llama to work. In August, Meta reported on organizations ranging from Accenture (ACN) and DoorDash (DASH) to Goldman Sachs (GS) use Llama to develop their own AI software.
It’s not just that Meta implements its AI into its own products. The company also offers its Llama models as open source software. Open source software is typically software that companies create and then allow developers to download and augment for free. This contrasts with, for example, OpenAI, which uses a closed-source software approach for its GPT family of models.
All of this has helped make Meta a formidable force in the AI space and a potential threat to its AI rivals.
“If Llama didn’t exist, (Google’s) OpenAI and Gemini would be in a better position,” Gene Munster, managing partner of Deepwater Asset Management, told Yahoo Finance. “There are undoubtedly developers who, without Llama, would probably have been forced to go to Gemini or GPT.”
But the AI industry is still in its infancy, and it’s unclear which company will be the big winner in the long run.
Meta’s AI strategy is expected to deliver a number of benefits to the company in the short and long term. From the outset, the company is able to apply its Llama models to its products, helping to improve its own offerings while simultaneously proving the software’s value in real-world scenarios.
After all, if Meta uses its models in its own products, why wouldn’t third-party developers do so? And because the Llama family is open source, developers can peek under the hood of the software, allowing them to fix flaws or risks over time.
“Meta has democratized AI, open sourced it, using what they build on their own platforms,” said Daniel Newman, CEO of Futurum Group. “They really did it on every level.”
Of course, Llama will not only help Meta improve its existing software and build developer goodwill, but it could also prove to be a stable source of revenue in the long term.
“We want this to be open, but if you’re someone like Microsoft or Amazon or Google and you’re going to essentially resell those services, that’s something we think we should get a portion of the revenue for,” CEO by Meta. Mark Zuckerberg said during Meta’s third quarter 2023 earnings call. “So those are the deals we intend to make, and we’ve started to do that a little bit.”
While Zuckerberg said he didn’t think the deals would contribute much to Meta’s revenue right now, the CEO said he hoped it could in the long term.
Meta shares are up 85% over the past 12 months, compared to Microsoft and Google, which are up 25% and 18%, respectively. Analysts say the company’s shares are well valued relative to earnings, but the promise of how AI will boost the social media company’s own products could prove to be a tailwind.
Meta’s family of open source models may give it a competitive edge, but that doesn’t mean it’s going to take out OpenAI, Google, Microsoft, Anthropic, or any other company fighting for position in the AI wars. game.
“It’s competitive in the sense that it’s a great, low-cost alternative for developers,” Munster said. “It is the most advanced and cheapest alternative.”
And just as Meta’s models continue to evolve, so do those of its competitors. Rivals OpenAI and Anthropic have reached funding deals with Microsoft and Amazon (AMZN), respectively, which give them the liquidity they will need to grow over the years.
Google also has the advantage of being able to offer its Gemini platform on hundreds of millions of Android smartphones around the world, while OpenAI should arrive on iPhones via Siri in the coming months.
And while consumers can use Meta’s AI services through its family of apps, users will find it easier to enlist an AI assistant built into their devices rather than having to open a third-party app.
However, with more 3.27 billion daily active users Through its family of applications, Meta has many opportunities of its own.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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