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Investing.com -- Morgan Stanley analysts said in a note to clients that concerns about Meta Platforms’ recent comments on investing $600 billion in the U.S. through 2028 are overstated, arguing that the scale of spending is “likely already in base numbers.”
The bank explained that investor worries have risen following Meta management’s remarks at the White House, with some concerned that such a large investment could lead to negative earnings and free cash flow revisions.
But Morgan Stanley pushed back, writing: “If we assume ~67% of the opex and capex in our model will be spent in the U.S. it implies ~$600bn of total investment from ’25–’28. This geographic mix, in our view doesn’t seem unreasonable given 1) many of the largest offices and R&D efforts are based in U.S., 2) larger concentration of higher cost talent likely based in the U.S., and 3) expected (and announced) large data center clusters to be built in the U.S.”
The analysts also pointed out that their model does not yet include potential free cash flow benefits from OBBBA, which they estimate could add around $40 billion between 2025 and 2028.
Instead, Morgan Stanley urged investors to focus on “engagement and rev benefits from GPU-based ML,” highlighting Meta’s pipeline of machine learning and AI-driven improvements.
“The good news is we think the runway here is still long,” the analysts wrote, citing larger models, recommendation tools, expansion of GEM and Andromeda, better content discoverability, and video upgrades.
Morgan Stanley reiterated an Overweight rating on Meta, with “11%/44% upside to base/bull cases,” calling it the company “delivering the most material incremental benefits from GPU-enabled machine learnings and early GenAI tools.”