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The AI arms race continues to reshape tech valuations, though questions persist about actual returns on these massive investments. Meta's ability to fund AI development from its core business cash flows gives it an advantage over pure-play AI firms that constantly need fresh capital, but that doesn't necessarily make it smart capital allocation. Apple's approach of leveraging others' AI while collecting App Store fees appears shrewder from a free cash flow perspective.
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META: Shares spiked Wednesday following the release of Muse Spark, the company's first AI model since its recent aggressive hiring and spending spree. The launch comes after a March NYT report highlighted underperformance in internal testing of Meta's new model. According to the WSJ, Muse Spark significantly outperformed Grok and bested Gemini on certain benchmarks while remaining competitive with ChatGPT and Claude. However, serious questions remain about Meta's massive AI investments given the company's AI initiatives still lag considerably behind frontier firms like Anthropic, OpenAI, and Google in both market presence and mindshare.
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