Investors seem to be overreacting a bit to the latest internal reports surrounding the delay of the latest AI model, codenamed Avocado, from Meta Platforms (NASDAQ:META | META Price Prediction). Indeed, Mark Zuckerberg and company have been aggressively giving AI their all, and with the shortcomings of its open-source LLaMA model, it does certainly feel discouraging to learn that we’ll all need to wait some time longer before Meta makes its real big splash in the AI waters.
Between the delay plunge and the ensuing relief rally sparked by layoff reports, it’s been quite the turbulent past week for shares of the social-media and AI juggernaut.
With Meta also taking the foot ever so slightly off the metaverse pedal with its decision to shut down Horizon Worlds, it certainly feels like the company is giving investors what they want. But, for the time being, big tech is out, as, too, is the rest of the stock market, which sank steadily lower through the day in what was a worrisome Wednesday.
The Meta Avocado AI delay report dip seemed overblown
Before you take a raincheck on the stock, though, I think it might actually be prime time to punch a ticket, especially as the price of admission gets closer to the range where the legendary billionaire investor Bill Ackman picked up shares last quarter. The man referred to the firm as “deeply discounted,” and I couldn’t agree more. As the sell-off worsens, perhaps the deep discount could evolve into a ridiculous markdown.
In any case, I think there’s a lot of deep value to be had for investors willing to forgive the firm for its Avocado delays. Indeed, many investors are growing impatient, but with a name that seems to be improving its footing by the week, I’d argue that patience could be key to doing well with the name. Of course, Meta isn’t the first firm to delay the launch of a much-anticipated AI. Apple (NASDAQ:AAPL) has also been punished, but wrongfully so, at least in my view.
In an ideal world, Meta and Apple would have launched their new-and-improved AI offerings on time and with all the polish. But the reality of the situation is that these models take time to get right. And it’s far better to take time to polish than to rush something that might gather negative reviews and publicity.
Simply put, the perfect AI experience is going to take time. And I’m a big fan of firms that are willing to not settle just to hit a deadline. For other pieces of software, sure, launching in a less-than-polished state is fine. But when it comes to AI, that extra time and care, I believe, is absolutely paramount.
Slow is steady, and steady might be fast when it comes to AI
With Meta following in Apple’s footsteps, I’m arguably inclined to be even more bullish on Meta, given its delay suggests it has some pretty high standards to meet. Shouldn’t a high bar of quality and performance be a good thing? Either way, I do think Meta is going to get Avocado right in due time. And long-term investors need not think too much about the latest delay overhang.
In any case, Meta is moving ahead with its massive data center projects (think the massive Hyperion) while eating its own AI cooking.
Bernstein analyst Mark Shmulik views the reported 20% in job cuts at Meta not as a sign of distress but as part of an AI-driven productivity pivot. He’s absolutely right, and that’s a major reason why I named Meta as one of the firms leading the future of AI work.
The bottom line
In the meantime, investors should view the Avocado delay anxiety, not as a sign that Zuckerberg and company are falling behind in the AI race, but because the bar has been raised.
Given the numerous problems (like hallucinations) that need to be solved, I’d argue it’s better to trust Zuckerberg’s judgment. Once Avocado is fully cooked, my guess is that it’s going to impress, especially compared to what’ll be on the market.
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