Korea's stock market plunged on the 2nd on shock over Meta's push into artificial intelligence (AI) computing services (Meta Compute). The news that it would sell surplus AI computing sparked worries that AI infrastructure supply may be excessive.
Yuanta Securities Korea said, "Meta Compute was first highlighted by a Bloomberg report the previous day, but in reality it is a strategy that has been underway for months," adding, "This issue is not a sudden signal of capital expenditures (Capex) cuts, but merely an event in which the existing AI infrastructure expansion strategy has been made concrete in the form of a cloud business."
Lee Jae-won of Yuanta Securities Korea said in a report the day before, "Meta already set up a data center-dedicated organization in January, and Mark Zuckerberg mentioned the possibility of entering the cloud business at the May shareholders meeting," adding, "What the market reacted to was not a new negative but a change in interpretation as a strategy already in progress became clear in the form of 'sellable computing.'"
The market is linking the sale of surplus AI computing to concerns that AI infrastructure supply is excessive, which in turn could mean a slowdown in hyperscalers' Capex. Ultimately, it suggests demand could slow for graphics processing units (GPUs), high-bandwidth memory (HBM), and server DRAM, which benefit from hyperscalers.
The analyst said that for those concerns to materialize, there must be confirmation of a cut to hyperscalers' Capex guidance, a reduction in HBM long-term agreements (LTAs), a slowdown in DRAM price increases, and fewer orders for next-generation GPUs. "Meta raised its first-quarter Capex guidance, and the competition to secure next-generation AI computing is continuing," the analyst said, adding, "So far, none of these four have been confirmed."
Instead, the analyst suggested Meta's monetization strategy could spur reinvestment. "The essence of Meta Compute does not mean computing capacity is excessive, but that AI computing infrastructure is being converted into a sellable cloud asset," the analyst said, adding, "This is a structure that eases free cash flow (FCF) burdens and makes continued investment in next-generation data centers sustainable."
The analyst viewed semiconductor stocks as a buying opportunity at lower levels amid volatility. "This plunge is not a signal that the AI Capex cycle is ending, but volatility of a short gamma nature caused by the recent concentration in large caps during a period when fundamentals have not been damaged," the analyst said, adding, "It is a chance to approach AI infrastructure and semiconductor/memory-related stocks as a buying opportunity on weakness."