Key takeaways
- Meta Platforms launches neocloud initiative to commercialize computing power and generate revenue from end-to-end data center infrastructure.
- Shares rose about $50 after the neocloud strategy was revealed.
- Wolfe Research maintains an Outperform rating with a price target of $800; META shares are currently worth around $605.72.
- Wolfe Research has increased its FY2027 capital spending forecast for Meta to $220 billion, significantly exceeding Street estimates of $160 billion and above.
- The company expects capital expenditures for 2026 to range between $125 billion to $145 billion. Meta has also started construction of an AI-focused data center facility in Canada.
Meta Platforms (META) shares are hovering around $605.72, gaining $2.60 in Thursday’s session, as two positive developments highlight the tech giant’s aggressive expansion of AI infrastructure.
Jim Cramer highlighted Meta during a Mad Money broadcast this week, praising the company’s strategic entry into the new cloud sector as a calculated decision. The social media giant, which has historically been among the largest buyers of computational resources, is now positioning itself as a seller.
This strategic shift initially worried some competitors. Shares of the Neocloud sector witnessed a broad sell-off last week after Meta announced its intention to compete directly in this space.
Kramer rejected the pessimistic explanation. He stressed that the ability to rent computing resources at premium prices indicates the scarcity of data center infrastructure, not its surplus. META shares have risen about $50 since the strategic announcement.
Wolf research increases capital spending expectations
Wolfe Research reaffirms its superior position on dead This Thursday, maintaining the valuation target at $800. Shares are currently trading well below that limit at roughly $605.72 – down from its 52-week high of $796.25.
The company’s most significant adjustment was to its capital spending forecast. Wolf currently expects Meta to commit $220 billion to infrastructure during fiscal year 2027, which represents a significant increase from its previous capacity forecast of $15 billion. This number significantly exceeds the consensus Street forecast of $160 billion or higher.
Additionally, Wolf has revised its capacity forecast upward, and now estimates that Meta will have approximately 17 GW of operational capacity next year, up from a previous estimate of 15 GW.
The research organization had previously indicated that Meta is likely to increase capital expenditures and may seek capital injections through debt instruments or equity offerings to support it.
For calendar year 2026, Meta’s capital spending is expected to be between $125 billion and $145 billion, representing a significant step up from previous projections. Wolf stressed that Meta must demonstrate to shareholders tangible and sustainable revenue streams beyond advertising to ensure such investment volumes.
Meta currently maintains a return on invested capital of 25% along with a debt-to-equity ratio of 0.36.
Canadian Data Center Initiative and Advertising Tools Improvement
With regard to infrastructure development, dead It recently began construction on a new data center campus in Sturgeon County, Alberta – marking the opening of its Canadian facility and 33rd in the world. Designed for artificial intelligence computing loads, the installation represents an investment of over C$13 billion and is expected to generate approximately 3,000 construction jobs as well as more than 300 permanent jobs.
Meta is simultaneously integrating its Muse Image model into its Advantage+ creative advertising platform, bringing visual thinking and self-optimization capabilities into its ad generation infrastructure.
Erste Group raised META from Hold to Buy this week, signaling the company’s investment trajectory in artificial intelligence. Likewise, Truist Securities maintained its Buy recommendation, focusing on Meta’s AI distribution benefits through the Muse Spark ecosystem.
CEO Mark Zuckerberg admitted that the development of the AI agent has progressed more gradually than initially expected. Separately, investor Michael Burry created short positions including AI infrastructure stocks.
Meta stock is currently trading at $605.72, and Wolfe Research’s $800 valuation target indicates ~32% upside potential from current levels.
