Meta Platforms Spent $6.7 Billion on Artificial Intelligence (AI) Data Centers Last Quarter, but It Spent Twice as Much on This 1 Thing

Core Viewpoint - Meta Platforms is significantly increasing its investment in artificial intelligence, raising its full-year capital expenditure outlook to between $35 billion and $40 billion, up from a previous range of $30 billion to $37 billion, following a $6.72 billion expenditure in Q1 [1][2] Group 1: Capital Expenditures and AI Investment - Meta's management has committed to building leading AI models, which has led to a substantial increase in capital expenditures, marking the highest spending on this line item since 2021 [1] - The company spent $6.72 billion in Q1 and plans to double its annual capital expenditures compared to 2021, which has raised concerns among investors [2] Group 2: Share Repurchase Program - In Q1, Meta generated a free cash flow of $12.53 billion and spent $14.64 billion on share repurchases, the highest since Q4 2021 [3] - The board authorized a $50 billion increase to its share repurchase program, with $66.4 billion remaining as of the end of Q1 [3][4] - Management may utilize a significant portion of the share repurchase authorization by year-end, driven by strong free cash flow growth and potential changes in taxation on buybacks [4] Group 3: Financial Performance and Stock Valuation - Meta's average repurchase price was $429.46 per share, and the stock is currently trading around $468, indicating that repurchases have been beneficial in the short term [6][7] - The company's forward price-to-earnings (P/E) ratio is 23.5, above the S&P 500 average of 20.7, but strong cash flow and capital return plans justify a slight premium [7] - Analysts project a 30% increase in earnings per share over the next five years, suggesting a PEG ratio below 1, which supports the case for continued share repurchases at current levels [7]