Meta Turns Heads With 'Supercluster' AI Plan Ahead of Trump Announcement

We’ve remained bullish on the opportunities ahead for the Portfolio’s direct and indirect AI and data center positions that include Nvidia NVDA, Marvell MRVL, Eaton ETN and United Rentals URI.

Last week’s June revenue report from Taiwan Semiconductor TSM and what was revealed about TSM’s June quarter prospects was very supportive ahead of its earnings report on Thursday (July 17). You’ve probably noticed some headlines about AI talent poaching, with Meta META leading the pack. On Monday, that goes one step further with CEO Mark Zuckerberg sharing that the company is building several massive data centers to power its artificial intelligence efforts, with the first one expected to come online next year.

While most data centers today house only hundreds of megawatts of capacity apiece, several AI and major technology companies, including OpenAI and Oracle Corp. ORCL are involved in plans to develop ones capable of handling several gigawatts. Zuckerberg cited findings from SemiAnalysis saying Meta is on track to be the first with a “supercluster” that houses more than a gigawatt of capacity.

Zuck went one step further, supporting the view that the AI and data center buildout will be a multi-year event. We’re referring to his comment that Meta is going to invest “hundreds of billions of dollars” into data-center capacity to build superintelligence. If we think back to April, when Meta said it could spend as much as $72 billion this year, with a focus on AI and data centers, and read between the lines, it suggests Zuck is preparing Wall Street for another big year of capex spending in 2026. We’ll be listening for that when Meta reports its June quarter results on July 30, as well as its comments about margins and streamlining its ad business by using AI.

We also recognize the arms race nature of what is unfolding when it comes to AI and data center capacity, and that means a few things.

First, we are likely to see a step up in overall capital spending levels on that by Big Tech, which will be a positive demand driver for multiple Portfolio holdings. Second, we will want to continually track AI adoption in the enterprise, across government and with consumers to determine where we are in the AI adoption cycle. Our thinking is that as that adoption matures and we go from early innings into mid-to-late innings, the risk of industry overcapacity could emerge. We do not think we are anywhere close to that yet, but because we’ve been around the block and technology adoption curves more than a few times, we understand why that risk could escalate in the next few years.

Morgan Stanley Bullish on Microsoft AI

And while we are talking about AI adoption, Morgan Stanley is out with new findings from its June quarter CIO survey that found information technology budgets and software spending should increase by 3.6% year over year throughout 2025. Those results also found that, "Relative to broader software, CIOs expect Microsoft to see the highest forward year spending growth at +6.3%, slightly moderating from +6.5% in our 4Q24 survey, though Microsoft continues to lead the pack as 67% of CIOs also expect an increase in net spending on Microsoft tools…”

Almost a month ago, we lifted our MSFT price target to $515 from $480, and since then, the shares have crossed the $500 level. Our plan is to review our price target again once we have Microsoft’s June quarter results and guidance in hand. One of the things we will want to see is the renewed monetization of cloud as Microsoft’s capacity addition efforts come to fruition. Based on Morgan Stanley’s findings, we very well could see Microsoft lift its capital spending levels to meet customer demand.

Trump AI Announcement

We are reading reports that President Trump will announce $70 billion in artificial intelligence and energy investments in Pennsylvania on Tuesday, which would certainly be another positive for several of our holdings. These investments are expected to range from new data centers, power generation expansion and grid infrastructure upgrades, along with AI training programs and other programs.

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At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, ETN, URI, META and MSFT.