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Meta Brings The Heat With Slew of Announcements
PLUS: China Needs More Stimulus
TheBRRR’s Thoughts
GM.
Meta has been a terrific company since it underwent a pivotal transformation during the pandemic.
As the COVID bubble unwound, activist investors pressured big tech to get lean and churn out profit.
Zuck complied, setting the stage for a significant turnaround.
After falling 70% from 2021 into late 2022, Meta's stock has since soared fivefold and now sits 55% higher than its 2021 peak.
In addition to cleaning up its balance sheet and shedding excess spending, the company has executed corporate strategy at a high level.
After being caught off guard by Apple's new, restrictive privacy policy—which damaged its ad platform—Meta innovated its way out of the data problem.
By leveraging AI and machine learning, the company made audience targeting more effective than ever despite receiving less data from users.
With these changes, Meta’s operating income surged by 60% in 2023.
Meta’s approach to AI has been to open-source its models and tooling, a strategy that has attracted developers worldwide and allowed the company to stay within arm's reach of OpenAI.
After putting so many wins on the board, Mark Zuckerberg has regained the momentum to pursue his passion projects—the metaverse and virtual reality.
This was on display this week at Meta’s annual Connect conference, which we cover in-depth in today’s lead article.
Meta Brings The Heat With Slew of Announcements
Synopsis:
Meta’s Connect 2024 event delivered major announcements in its push to lead in AI and the metaverse, featuring product launches like the affordable Quest 3S VR headset and the futuristic Orion AR glasses prototype.
Mark Zuckerberg emphasized the company’s strategy to compete with Apple and position Meta’s hardware as an accessible alternative to high-priced offerings like Apple’s $3,499 Vision Pro.
The event also showcased advancements in AI, with the introduction of Llama 3.2, and improvements to Ray-Ban Meta smart glasses. Here’s the full breakdown of Meta’s latest developments and what they mean for the market.
The Details:
Quest 3S VR Headset
The new Quest 3S headset, priced at $299 for 128GB, offers a more affordable entry into VR than its predecessor, the Quest 3 ($499). Meta is positioning the Quest 3S as more than just a gaming device, touting it as a full computing system capable of running multiple apps simultaneously.
It features improved passthrough, allowing users to interact with the real world via cameras and sensors while still wearing the headset.
Market Strategy: Meta has poured $65 billion into its VR and AR ambitions since acquiring Oculus in 2014, positioning the Quest series as a cheaper, more accessible option compared to Apple’s high-priced alternative.
Orion AR Glasses Prototype
Meta surprised attendees with the reveal of Orion, a prototype of fully augmented reality glasses. Touted as the most advanced AR glasses to date, Orion features hand and eye-tracking and neural control, allowing users to interact with the device through brain signals—a development stemming from Meta’s acquisition of CTRL-Labs.
Not Consumer-Ready: Although not yet available for purchase, Meta envisions Orion as the future of its AR efforts, with a fully functional consumer version potentially arriving in the next decade.
Comparison to Apple: Zuckerberg’s justification for Meta’s heavy spending in AR is rooted in the desire to prevent Apple from monopolizing future hardware platforms, highlighting the long-term strategic rivalry.
Llama 3.2 AI Model
Meta unveiled its latest AI model, Llama 3.2, which is multimodal, meaning it can interpret text, charts, and images. The 11B and 90B models can analyze images and graphs, pinpoint objects, and even answer complex questions based on visual data.
Voice Interactions: Meta AI has been upgraded to allow voice commands across its platforms—Messenger, WhatsApp, Instagram, and Facebook—using celebrity voices like John Cena and Judi Dench to enhance user interaction.
WHY IT MATTERS:
Meta’s Quest 3S headset, priced at a fraction of the Apple Vision Pro, is designed to capture a broader audience by offering a capable VR device for gaming, productivity, and entertainment. This aggressive pricing, along with the Orion AR glasses, reflects Meta’s ambition to dominate the AR/VR market and compete directly with Apple in the battle for future hardware platforms.
The updates to Meta AI and Ray-Ban Meta smart glasses signal Meta’s drive to push AI-powered wearables into the mainstream. By integrating AI capabilities, Meta is expanding beyond VR gaming into real-world applications, setting the stage for future products that combine augmented reality and AI-driven interactions.
For traders and investors, Meta’s strategic positioning could lead to long-term growth as AR, VR, and AI technologies converge. However, its heavy spending—over $65 billion—and the ongoing rivalry with Apple are key risk factors to watch. Meta's ability to scale these technologies and achieve mass-market adoption will be crucial to its success.
Yuan Rises Despite Rate Cuts, Craving Direct Fiscal Stimulus
Synopsis:
China's sluggish economy is facing more significant challenges than interest rate cuts can resolve, with analysts stressing the need for substantial fiscal stimulus to drive growth.
Despite the People's Bank of China's (PBOC) latest moves to lower mortgage rates, weak domestic demand and high leverage are limiting the effects of monetary policy. A trillion-yuan gap in fiscal spending threatens Beijing's 2024 growth target, signaling more aggressive fiscal measures may be required.
The Chinese yuan surged to its highest level in over a year, breaking the 7 per US dollar threshold following a series of policy moves by the People's Bank of China (PBOC) and an interest rate cut from the US Federal Reserve.
The Details:
The PBOC cut rates on existing mortgages, surprising markets and boosting Chinese stocks, yet the bond market remained cautious.
Analysts argue that fiscal policy, especially spending on housing, is needed to address China’s longest deflationary streak since 1999.
Despite rate cuts, weak demand and high corporate/household leverage are hampering borrowing, weakening the impact of looser monetary policy. The CF40 think tank notes a 1 trillion yuan shortfall in fiscal spending, which could force Beijing to issue additional bonds.
China's economy grew 5% in the first half of 2024, but industrial activity and retail sales remain sluggish, threatening the full-year growth target of 5%.
Why It Matters:
With limited room for further monetary easing, China’s path to growth relies heavily on fiscal policy. The potential for additional bond issuance and deficit spending may inject short-term liquidity, but long-term risks like debt accumulation and weak domestic demand loom large.
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Portfolio Notes
June 12: These assets all look great for continuation higher.
We are considering moving on from Tesla as it has lagged the rest of our portfolio badly and doesn’t have an obvious catalyst. We’ll monitor and let you know if we decide to move on.
Older Notes
Wednesday, April 3, 2024: We haven’t deployed the cash yet, but are eyeing exposure to a few assets including META and PLTR.
Monday, March 11, 2024: We sold Apple this morning. The newsletter held the stock from inception a year ago for a meager 12% gain.
The company has lost its magic evident by complacent iPhone releases, lack of a coherent vision for AI integration and punitive & anti-competitive App Store policies.
We believe the stock will move in-line with the broader Nasdaq going forward.
We’ll sit on the cash for now, but plan to redeploy it quickly.
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$META: Sleeper in AI race and ad biz is proving resilient
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