Facebook Inc. is planning a spending spree next year that could give network providers and chip companies a boost.
The social media giant announced Monday that it expects capital expenditures of $ 29 billion to $ 34 billion in 2022, up from an estimated $ 19 billion in 2021. The forecast for 2022 was well above the FactSet consensus of $ 23.3 billion before Facebook
Monday afternoon win call.
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The anticipated increase will be "driven by our investments in data centers, servers, network infrastructure and office facilities," said CFO David Wehner on the call. A big driver of spending growth is increased investment in artificial intelligence and machine learning, according to Wehner, as Facebook looks to improve its recommendations and ad performance.
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Several large hardware and infrastructure companies could win if Facebook opened its wallet, analysts say. Shares in Arista Networks Inc.
are up 4.3% in Tuesday trading while shares of Cisco Systems Inc.
are up 1.9%, with both seen as potential beneficiaries.
"This is very positive read for Arista as Facebook is one of the two cloud titans that make up a large portion of Arista's revenue," Evercore ISI analyst Amit Daryanani wrote in a customer note. "This is also, to a lesser extent, positive for Cisco, as we believe they could gain some stake in Facebook in the 2022/23 timeframe."
Wells Fargo's Aaron Rakers agreed that Arista could benefit from Facebook's increased spending as the company moved to Microsoft Corp.
Rakers said Facebook has stayed a few billion dollars below its investment forecast in recent years, although he still sees the company's comment as "a notably positive derivative data point on cloud capital spending trends into next year."
He was also encouraged by Facebook's comment on his plans to spend on solutions to support artificial intelligence, a trend that Nvidia Corp.
"Recently, a semiconductor industry analyst stated that Facebook would go 'all-in' with NVIDIA GPUs instead of using Intel's Habana solutions, and at the same time noted that it was expecting Intel's Mount Evans IPUs (Infrastructure Processing units) can potentially be used in every server. " Rakers wrote.
He added that the company's discussion "should be viewed as positive for the overall server CPU market," but that it is particularly interesting given "the continuing expectations that AMD Facebook will be a major new customer with its EPYC Milan CPUs the third generation could announce in the future. ”
Nvidia stock was up 6.3% in Tuesday's session, and the company broke the $ 600 billion market cap threshold for the first time in intraday trading. Advanced Micro Devices Inc.
have increased by 1.0%.
Facebook's outlook bodes well for storage companies too, several analysts said. Susquehanna analyst Mehdi Hosseini saw the forecast as "in line" with his expectation that server and storage builds in the first half of 2022 will show better than seasonal trends.
Wells Fargo's Rakers said the comment "remains positive for the HDD (Hard Disk Drives) (WDC & STX) industry, with cloud-controlled nearline HDDs now accounting for ~ 60% + of total HDD industry sales".
Western Digital Corp.
Shares were down 0.7% in Tuesday trading, while Seagate Technology Holdings PLC
Stocks are down 2.7%.