This article first appeared on GuruFocus.
Meta Platforms (NASDAQ:META) may have a better AI-cloud opportunity in renting out excess compute than trying to become a full-scale hyperscaler, according to Morgan Stanley analyst Brian Nowak.
Nowak believes Meta is more likely to build a neocloud business, focused on leasing GPU-powered AI capacity, rather than competing head-on with Amazon (NASDAQ:AMZN) Web Services, Microsoft (NASDAQ:MSFT) Azure, and Alphabet (NASDAQ:GOOGL) Google Cloud across the full cloud stack. He reiterated a Buy rating on Meta with a $775 price target, implying nearly 33% upside.
The logic is simple: Meta already needs massive compute for its own AI products, but selling some excess capacity could generate high-margin revenue without the cost and complexity of building a broader cloud platform. Nowak estimates Meta could add around 2 gigawatts of incremental compute capacity in 2026 and up to 3.5 gigawatts in 2027.
He expects Meta’s capital spending to rise to $175 billion in 2027 and $205 billion in 2028, up from $145 billion in 2025. Even then, he sees the neocloud route as a cleaner return story, estimating that leasing 250 megawatts of compute at $40 per watt could add roughly 8% to Meta’s 2028 annual earnings per share.
https://finance.yahoo.com/technology/ai/articles/morgan-stanley-sees-smarter-ai-162019058.html
