#SocialStocks: Meta Unveils More Details on AI Technology, Large Language Model

Warren pushes for SEC probe into Twitter takeover, government communications with social media companies allowed to resume and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

SEEING CLEARLY: 

When Meta (META) struck a deal to buy all the augmented reality displays made by British firm Plessey in March 2020, the deal “appeared to be a savvy way of squeezing out” Apple (AAPL) in the competition to develop AR glasses, but three years later the deal has “turned into a bust for Meta,” which is scaling back its ambitions for AR glasses, according to The Information’s Wayne Ma. Development of Plessey’s technology has stalled as Meta Platforms has struggled to make Plessey’s displays bright enough for use in its AR glasses and to reduce defects that crop up in the manufacturing process, the report said.

AI FOR ALL: 

Meta CEO Mark Zuckerberg said on Tuesday he is planning to provide the code to the company’s AI technology to developers around the world for free, Mike Isaac and Cade Metz of The New York Times reported This decision could help Meta catch up to competitors like Google (GOOG) and Microsoft (MSFT), who moved quickly to incorporate AI into their products. “When software is open, more people can scrutinize it to identify and fix potential issues,” Zuckerberg said in a Facebook post.

Qualcomm (QCOM) and Meta will enable Meta’s new large language model, LLaMA2, to run on Qualcomm chips on phones and PCs starting in 2024, the companies announced, according to CNBC. To date, LLMs have primarily run in large server farms, on Nvidia (NVDA) graphics processors, due to the technology’s vast needs for computational power and data, but “the AI boom has largely missed the companies that make leading edge processors for phones and PCs, like Qualcomm,” CNBC noted.

Zoom (ZM) tweeted: “In addition to our partnerships with @AnthropicAI and @OpenAI, we’re expanding our flexible and federated approach to AI with @Meta’s new, open LLaMA2 model!”

John Montgomery, Microsoft’s corporate VP, Azure AI, stated in a blog post: “Today, at Microsoft Inspire, Meta and Microsoft announced support for the Llama 2 family of large language models – LLMs – on Azure and Windows. Llama 2 is designed to enable developers and organizations to build generative AI-powered tools and experiences. Meta and Microsoft share a commitment to democratizing AI and its benefits and we are excited that Meta is taking an open approach with Llama 2. We offer developers choice in the types of models they build on, supporting open and frontier models and are thrilled to be Meta’s preferred partner as they release their new version of Llama 2 to commercial customers for the first time. Now Azure customers can fine-tune and deploy the 7B, 13B, and 70B-parameter Llama 2 models easily and more safely on Azure, the platform for the most widely adopted frontier and open models. In addition, Llama will be optimized to run locally on Windows. Windows developers will be able to use Llama by targeting the DirectML execution provider through the ONNX Runtime, allowing a seamless workflow as they bring generative AI experiences to their applications… Meta and Microsoft have been longtime partners on AI, starting with a collaboration to integrate ONNX Runtime with PyTorch to create a great developer experience for PyTorch on Azure, and Meta’s choice of Azure as a strategic cloud provider. Today’s announcement builds on our partnership to accelerate innovation in the era of AI and further extends Microsoft’s open model ecosystem and position as the world’s supercomputing platform for AI.”

REELS MAKEOVER: 

Meta’s Instagram said it is making some upgrades to Reels templates that will help users more easily “find inspiration and create engaging reels.” “We’re making it easy for you to find inspiration for your next reel, starting with a new and improved Template Browser,” the company said. “Now, you can browse templates by category in the Template Browser, organized by Recommended, Trending, and templates or audio you’ve saved… We’re also enhancing the creation and editing experience for templates which will help elevate your reels in just a few taps. When you create from a template today, the audio, number of clips, duration of the clips, and AR effects will automatically be added to your reel. In the coming weeks, we’ll also start automatically adding text and transitions that were used in the original reel. Templates will be customizable – allowing you to add or remove clips, adjust the timing of individual clips, or edit any preloaded element.”

NEW THREADS: 

Meta CEO Mark Zuckerberg said in a Thread, “I’m very optimistic about how the Threads community is coming together. Early growth was off the charts, but more importantly 10s of millions of people now come back daily. That’s way ahead of what we expected. The focus for the rest of the year is improving the basics and retention. It’ll take time to stabilize, but once we nail that then we’ll focus on growing the community. We’ve run this playbook many times (FB, IG, Stories, Reels, etc) and I’m confident Threads is on a good path too.”

BACKING OFF: 

Cathie Wood’s ARK Investment Management has written down its stake in Twitter (TWTR) by 47% since Elon Musk took the social-media company private last year, The Wall Street Journal’s Jack Pitcher quoted Wood as having said in an interview on Friday. “We take fair valuation very seriously and absolutely have had to write that [Twitter] down. The write-down is not representative of our fundamental outlook and belief in the long term return on investment we believe that it will have for our shareholders,” the investors is quoted as having said, while adding that she is still bullish on Twitter’s long-term outlook.

CONFLICTS OF INTEREST: 

Senator Elizabeth Warren is urging the SEC to probe Tesla (TSLA) and its board of directors over possible “conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders” related to CEO Elon Musk’s takeover of Twitter. Sen. Warren wrote in a letter to SEC Chair Gary Gensler that the Tesla’s board “apparent lack of independence” from Musk, combined with “inaction and incomplete disclosures, raise questions about possible violations of securities laws and exchange rules which fall under SEC’s jurisdiction.”

HALTED: 

The 5th U.S. Circuit Court of Appeals in New Orleans has temporarily halted a lower court’s order limiting executive branch officials’ communications with social media companies such as Twitter, Facebook and YouTube about controversial online posts, the Associated Press’ Kevin McGill reported. Lawyers from the Biden administration had asked the federal appeals court to stay the preliminary injunction issued on July 4 by U.S. District Judge Terry Doughty, the author said, noting that Doughty had dismissed a request to put his order on hold pending appeal.

ANALYST COMMENTARY: 

TD Cowen upgraded Meta Platforms to Outperform from Market Perform. The firm, which raised its 2023-2028 estimates following positive Q2 advertising market checks, thinks consensus estimates are likely too low given potential monetization upside from Reels, Threads monetization optionality and the potential for more cost cuts.

Truist raised the firm’s price target on Meta and maintained a Buy rating on the shares. The firm is incrementally positive on Meta into the Q2 print on July 26, reflecting continued recovery in ad spending in Q2 and expectations for further acceleration in 2H23, the analyst told investors in a research note.

JMP Securities raised the firm’s price target on Meta Platforms and reiterated an Outperform rating on the shares ahead of the Q3 earnings on July 26. The firm believes Meta is in the early stages of benefiting from multiple product catalysts, including Reels, AI, and cost discipline, and expects Facebook and Instagram to continue to take share of user time, the analyst tells investors in a research note.

Evercore ISI upgraded Pinterest (PINS) to Outperform from In Line. The firm cited four reasons behind the upgrade; what it sees as “clear evidence” of digital ad spend stabilizing; increasing evidence that the operational improvements new CEO Bill Ready has implemented at the company over the past year are bearing fruit; its belief the first two reasons are combining to create “something of a fundamental inflection point”; and a current valuation it calls “reasonable for a company with the potential to generate sustained 30%+ EBITDA growth.”

Goldman Sachs raised the firm’s price target on Pinterest and maintained a Buy rating on the shares. The firm made “minimal changes” to its forward estimates aside from updating the fully diluted outstanding share count per the company’s most recent filing, the firm told investors in a Q2 earnings preview note for the internet U.S. digital ads group. Goldman also raised the firm’s price target on Snap and kept a Neutral rating on the shares. The firm has slightly lowered its medium-term revenue growth estimates to reflect some execution risk around Snap’s direct response business rebuild, the analyst told investors. Additionally, Goldman raised the firm’s price target on Pinterest and keeps a Buy rating on the shares. The firm made “minimal changes” to its forward estimates aside from updating the fully diluted outstanding share count per the company’s most recent filing. Lastly, the firm raised the firm’s price target on Meta and backed a Buy rating on the shares. The firm has increased forward revenue growth estimates to reflect continued core ad business recovery and “idiosyncratic” opportunities such as Reels, CTM ads and Advantage+ continuing to scale.

Credit Suisse raised the firm’s price target on Meta and reaffirmed an Outperform rating on the shares ahead of quarterly results. Revenue growth for Meta 2020-2023 has been anything but linear, and as the firm turns its eyes to what should be normalized growth for 2024, its reference point is the $15B-$16B in annual incremental dollars it was adding in revenue pre-pandemic. More near-term, Credit Suisse’s checks with advertisers continue to suggest budget growth acceleration. And similar to the feedback established in the last few quarters, Advantage+ continues to help advertisers adjust for signal loss, which is driving incremental share recapture for both Instagram and the core Facebook app.

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Originally Posted July 19, 2023 – #SocialStocks: Meta unveils more details on AI technology, large language model