Shares of Meta Platforms rose more than 10% on Wednesday after a Bloomberg report said the company is planning to launch a cloud business that would sell access to its artificial intelligence (AI) computing power and models.

At 12.10 pm ET, Meta shares were up 10.02% at $619.72, gaining $56.43 as investors welcomed the company’s latest AI strategy and saw a potential way for it to generate returns from its massive infrastructure spending.

Bloomberg report sparks rally

According to a Bloomberg report, Meta is developing a business that would sell cloud access to its AI computing capacity and models. The plans are still under development and the strategy could change, according to people familiar with the matter.

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The proposed service would allow developers to access AI models hosted on Meta’s infrastructure, including Muse Spark, and pay for the computing power required to run them. The report added that Meta is also considering selling raw AI computing capacity, similar to what AI-focused cloud providers, or “neoclouds,” currently offer.

A step closer to recover AI spending

This initiative could help Meta generate revenue from computing capacity that is not being fully used, easing investor concerns over the company’s heavy AI spending.

In its April earnings report, Meta raised its projected capital expenditure for the year by $10 billion, taking its expected spending to $125 billion-$145 billion. The company cited “expectations for higher component pricing” and “additional data center costs.”

Meta has also signed computing deals with companies including Alphabet’s Google, CoreWeave and Oracle as it expands its AI infrastructure. Demand for AI computing power has surged since OpenAI launched ChatGPT in 2022, prompting major AI developers to invest heavily in data centres and graphics processing units needed to train and run large AI models.

Competition in cloud market

According to Bloomberg reports, if Meta enters the cloud business, it would compete directly with established cloud providers including Amazon Web Services, Microsoft Azure and Google Cloud. The business could also reduce Meta’s dependence on advertising by opening a new source of revenue through AI services for businesses.

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The proposed service would be similar to Amazon Web Services’ Bedrock platform, which allows developers to access AI models from different companies.

Zuckerberg had hinted at cloud plans

At Meta’s shareholder meeting in May, Mark Zuckerberg had indicated that cloud computing was “definitely on the ⁠table,” adding that companies were approaching Meta “almost every week” to buy access to its AI models or spare computing power.

The latest report comes as Meta continues its aggressive push in AI, with the company projected to spend as much as $145 billion on AI infrastructure this year as part of Big Tech’s broader investment boom in artificial intelligence.

Pressure on AI cloud providers

The report also weighed on AI cloud providers that currently work with Meta. Shares of CoreWeave fell 10.8%, Nebius dropped 12.4%, as investors worried Meta could rely less on their services while becoming a direct competitor.

“The impact of adding Meta’s capacity to the market is more likely to be on neoclouds than the big hyperscalers. Those companies like CoreWeave and Nebius rely on Meta for their growth and Meta ⁠may not need them anymore,” said Gil Luria, managing director of D.A. Davidson to Reuters. “This is very similar to the situation SpaceX has found itself in, which led it to sell compute capacity as ⁠well,” said Luria to Reuters.

Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.