☁️ Meta’s cloudy future

Last week, Bloomberg reported that the social media giant Meta is planning to join its Mag 7 hyperscaler peers and start a cloud business that sells excess AI compute.

• In late May, CEO Mark Zuckerberg suggested that a foray into this business was “definitely on the table.”

• Investor attitudes toward Meta’s lack of a cloud business have, to date, shifted with the wind. Sometimes, it’s seemingly served as cause to question the rationale for the company’s massive AI capex bill. Other times, harnessing its AI capabilities to accelerate sales has been proof positive of the utility of those outlays.

• Neocloud and data center companies CoreWeave, Nebius, IREN, and Cipher Mining got slammed in the wake of the report — Meta having excess compute to sell is a direct shot at firms whose raison d'être is to provide just that.

• The story of the hyperscalers in 2026 has largely been: “the beatings will continue until the cash flow outlook improves.” You can make the argument that Meta’s move has the potential to improve this situation from either end: more cash in, or less out.

Selling compute rather than using it for, say, training models that disappoint, would offer an immediate short-term financial benefit. And the idea that there’s excess compute to begin with implies that maybe Meta’s AI capex bill won’t be so high going forward.

On the other hand, it’s not like the market has been rewarding cloud businesses lately. Hyperscalers recently traded at their lowest forward valuation since the launch of ChatGPT, and at a discount to the S&P 500. Hell, Microsoft just had its worst month since 2000 during the S&P 500’s best quarter since 2020!

The Takeaway

The implicit assumption that the market seems to be making here is that admitting you have enough excess compute for a cloud business is the first step toward not spending so damn much on compute. That may be a safe assumption; it may not. Cloud businesses require scale, and moving into the cloud business is a de facto commitment to having excess capacity that you’re able to sell!

And that means it’s not necessarily a clean down-arrow for the forward capex outlook; if anything, it’s a bet on the continuity and breadth of AI downstream demand. So far this year, market participants have routinely preferred to bet on picks-and-shovels or “bottleneck” stocks that benefit from AI capex over any potential ROI from would-be downstream demand.

Home runs are flying fast and furious across baseball right now, with the Chicago Cubs hitting EIGHT of them last Wednesday and 20-year-old Junior Caminero of the Rays going deep for a sixth consecutive game — part of a run with nine home runs in his past eight games. Prediction markets are anticipating an 84% chance there’ll be 15+ instances this season of a player hitting 3+ home runs in a single game.

Everyone digs the long ball, so we’re not complaining. But as is often the case with MLB, there are complications. A few years back, it was found that elevated leaguewide home run rates were likely due to the ball itself being “juiced,” something that abruptly reversed in subsequent years. Fast-forward to now, and the ball is becoming the main character again: a sudden, drastic drop in aerodynamic drag over the last month (which can actually be benchmarked using tracking data) has sent homer rates skyrocketing once more, bringing us back to the same old question: Are the hitters really this hot, or is the baseball itself doing some of the work?

Subscribe

• Who owns AI? Last Thursday, the Financial Times reported that OpenAI CEO Sam Altman is in preliminary talks with the Trump administration to give the US government a 5% stake in the company. Altman has advocated that giving the US a financial stake in the company is the best way for the public to reap the benefits of AI. The idea of sharing AI profits with the American people has arisen before, with Senator Bernie Sanders’ American AI Sovereign Wealth Fund Act, which would establish a sovereign wealth fund through a 50% equity stake in AI companies.

• Beer for people who want less beer: As we’ve previously covered, alcohol sales are under pressure as consumers grow more health-conscious and GLP-1s curb appetites for booze. To cater to lighter drinkers, Constellation Brands is putting Pacifico into “pony” beer cans (7- to 9-ounce cans, compared to the typical 12- or 16-ounce can) after seeing success in sales of its Coronitas and Modelitos. Sales Molson Coors’ Miller High Life pony bottles have grown steadily over the past five years, and Anheuser Busch released a Post Malone-branded, limited-edition miniature can of Bud Light, highlighting that smaller cans have the benefit of staying colder while you drink. 

• 🇺🇸 USA vs 🇧🇪 Belgium: Is this the only soccer game today? No. Is this the only one we’re paying attention to? Maybe! The market’s pricing in a 46% chance* that the US is eliminated in this game, in what is shaping up to be the toughest match the US has faced so far.  

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.