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Blackstone Remains Committed to Data Center Investments Despite DeepSeek Concerns

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Blackstone reaffirmed its commitment to data center investments on Thursday, dismissing concerns that the rise of DeepSeek’s low-cost AI models would weaken demand for physical infrastructure. The alternative asset manager, which holds $80 billion in leased data centers, emphasized its “prudent approach” and strong partnerships with major global companies.

Data centers remain critical for AI development, providing the infrastructure needed to store, process, and analyze massive datasets. While investors previously saw data centers as key beneficiaries of AI growth, DeepSeek’s unexpected emergence has sparked debate over whether lower-cost AI models could reduce demand for such facilities.

Blackstone’s President and Chief Operating Officer Jonathan Gray addressed these concerns in a post-earnings call, stating that while the company is monitoring DeepSeek’s impact, lower AI costs could actually drive broader adoption, ultimately increasing data center demand. “As usage goes up significantly, there’s still a vital need for data centers. We still think it’s a very important segment,” Gray said.

Analysts at Jefferies echoed this sentiment, arguing that hyperscale cloud providers are unlikely to cut capital expenditures given the intensifying competition in AI. Tech giants such as Microsoft and Meta have also defended their aggressive AI spending, insisting that substantial investment is necessary to remain competitive.

Despite Blackstone’s confidence, its shares fell nearly 4% in afternoon trading, reflecting investor caution amid the evolving AI landscape.

 

Meta Reports Strong Q4 Sales But Forecasts Muted Outlook Amid AI Investments

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Meta Platforms (META.O) exceeded Wall Street expectations for its fourth-quarter revenue, reporting $48.4 billion, which outpaced analysts’ predictions of $47 billion. Despite this strong performance, the parent company of Facebook and Instagram issued a cautious outlook for the first quarter of 2025, with expected revenue between $39.5 billion and $41.8 billion, slightly below the analysts’ consensus of $41.72 billion.

Meta’s CEO, Mark Zuckerberg, struck an optimistic tone during a conference call, focusing on the company’s AI initiatives. He expressed confidence in the open-source AI strategy, commenting that the emergence of Chinese startup DeepSeek’s AI models reinforced his belief in this direction. “There’s going to be an open-source standard globally,” Zuckerberg remarked, emphasizing that he sees it as an American standard.

However, Meta’s outlook raised questions about the company’s capital spending, as the company relies on its core social media advertising business to finance its significant AI and “metaverse” investments, such as smart glasses and augmented reality systems. Meta has already committed up to $65 billion in capital expenditures for 2025 to expand its AI infrastructure, alongside increasing AI-related hires. The company also anticipates total expenses for 2025 to be between $114 billion and $119 billion, up from $95 billion in 2024.

Jeremy Goldman, principal analyst at eMarketer, noted that while Meta’s fourth-quarter results were strong, the key issue going into 2025 is whether its substantial AI investments will pay off. He highlighted that Meta’s family daily active people (DAP) metric, which tracks unique users who open any of its apps in a day, grew by 5% year-over-year to 3.35 billion.

Meta’s results came after DeepSeek, a Chinese AI company, launched new models that outperformed top U.S. competitors at a fraction of the cost, fueling concerns about the sustainability of U.S. AI business models and triggering a tech stock selloff. Zuckerberg acknowledged the challenges posed by DeepSeek but said it was too early to determine how its global impact would affect Meta’s AI strategy. He added that Meta’s AI teams were already incorporating insights from DeepSeek’s models into their work.

Meta continues to face financial losses in its metaverse-focused Reality Labs unit, which, while exceeding sales expectations, still reported a $5 billion loss in Q4. Despite these losses, Zuckerberg believes the long-term business potential of AI will become evident after 2025.

Meta’s hefty investment in AI includes plans to acquire more of Nvidia’s AI chips and develop custom silicon to train AI systems for better feed recommendations by next year. CFO Susan Li confirmed the company’s goal to use its own chips for these AI tasks. Meta’s continued investment in AI is part of its broader strategy to enhance user experiences across its platforms, while also aiming for cost reductions in AI model development.

 

Meta to Lay Off 5% of ‘Lowest Performers’, Plans to Rehire for Impacted Roles

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Meta Platforms announced that it will lay off approximately 5% of its workforce, targeting its “lowest performers.” The company, which employed more than 72,000 individuals as of September 30, will seek to fill the positions of those affected later this year. The decision is part of Meta’s ongoing efforts to “raise the bar” on performance management, according to a spokesperson for CEO Mark Zuckerberg.

Zuckerberg has previously indicated that more job cuts could be on the horizon in the coming months, as the company works to streamline operations and improve efficiency. This is in line with Meta’s broader shift toward prioritizing artificial intelligence (AI) investments, with billions being funneled into AI infrastructure to stay competitive in the rapidly evolving tech landscape. Many other tech firms, including Cisco and IBM, have made similar moves to redirect investments into AI.

The announcement follows significant restructuring efforts in 2022, which led to the loss of around 11,000 jobs. Meta’s “Year of Efficiency” in 2023 saw the company eliminate an additional 10,000 roles as part of cost-cutting initiatives.

In a related move, Meta also made headlines last week by canceling its U.S. fact-checking program and relaxing restrictions on certain controversial topics. This was seen as a response to pressure from conservative groups ahead of Donald Trump’s return to the U.S. presidential race.