Meta Might Have Frozen AI Hiring. Is It a Warning to Artificial Intelligence Stocks?

Meta Platforms is building enormous data centers to power artificial intelligence. (Courtesy Meta)

Meta Platforms artificial-intelligence recruitment spree looks to be at an end. It’s big news in the AI world but that doesn’t mean investment in the technology is about to plummet.

Meta has halted hiring in its AI division, The Wall Street Journal reported late on Wednesday, citing people familiar with the matter. It’s a major shift after CEO Mark Zuckerberg led a recruitment spree for AI developers in recent months with lucrative pay packages.

Coming on the heels of OpenAI CEO Sam Altman’s warning of a potential bubble in AI stocks, as well as an MIT report concluding that 95% of generative AI initiatives at companies are failing to achieve rapid revenue growth, it’s natural to wonder whether the wheels are coming off the hottest trade of the past couple of years.

But it’s time to take a step back and calm down. A pullback from stretched valuations isn’t the same as a bubble popping—especially with the huge wave of money still set to flow into AI infrastructure.

Meta’s hiring freeze looks like an inevitable pause for breath after a frenzy of recruitment to deliver Zuckerberg’s vision of “personal superintelligence.” Meta hired dozens of AI researchers from Microsoft-backed OpenAI, Amazon.com-backed Anthropic, and Alphabet Google DeepMind, offering pay of up to $100 million, according to OpenAI’s Altman.

It isn’t hard to imagine Meta might need a while to sort out exactly how all its new talent is going to work together, with the company restructuring its AI division into four different teams, according to the Journal. Meta didn’t immediately respond to a request for comment on the report. A spokesperson told the Journal it was “basic organizational planning” following budget setting.

Meta stock was slipping 1.3% in early trading Thursday. The S&P 500 and the Dow Jones Industrial Average were falling 0.5% and 0.7%, respectively.

While the war for AI talent has driven pay packages in the hundreds of millions, by far the more important driver for markets has been investment in computing infrastructure. That doesn’t look set to end soon—global AI spending is set to hit $375 billion this year, and grow to $500 billion in 2026, according to analysts at UBS.

As we have previously noted at Barron’s, the weakness in AI-exposed stocks this earnings season was primarily concentrated in software companies. Hardware companies have been more resilient, although the biggest of them, chip maker Nvidia, will report next week.

The signs for AI infrastructure demand still look good. Despite Altman’s bubble warning, OpenAI’s biggest issue continues to be insufficient computing power, according to the ChatGPT developer’s Chief Financial Officer Sarah Friar, speaking to CNBC on Wednesday.

Meta not hiring more AI researchers is one thing, but it isn’t really time to worry until it stops building data centers.

Write to Adam Clark at adam.clark@barrons.com