Meta Platforms’ Llama Valuation

Meta Platforms’ (NASDAQ:META) Llama family of AI models could be worth between $10 and $20 billion, representing more than a 1% upside to its current market capitalization.

Valuation Insights

According to Jefferies, this valuation reflects Meta’s leading share in open-source deployments, access to data, compute resources, and a vast consumer user base.

Analysts compare this valuation to companies like xAI and Anthropic, noting it is lower than OpenAI’s $86 billion due to Llama’s lack of monetization.

Comparisons with Other Companies

The analysts draw parallels with Red Hat, which was acquired by IBM (NYSE:IBM) for $34 billion in 2019 at 10x its FY19 revenue. Red Hat generated revenue through technical support and training for its Linux OS.

A more fitting comparison might be to the creators of Spark, who built a successful business around their open-source project.

Recent Performance

Meta’s reporting shows Llama’s token volume across major cloud service providers (CSPs) doubled between May and July 2024, after the release of Llama 3.1. Additionally, token volume grew tenfold for some of Meta’s largest CSP partners from January to July 2024.

Revenue Outlook

Jefferies analysts state that while Meta has formed revenue share deals with major CSPs selling Llama 2 and expects similar arrangements for Llama 3.1, revenues from these deals will likely be immaterial to the overall business.

Competitive Landscape

Given its vast market share and absence of an industry-leading foundational model, Jefferies believes Amazon Web Services (AWS) stands to benefit most from Llama’s increased usage.

Additionally, there have been discussions reported in August between executives from Amazon and Meta regarding a potential deal that could lead to Meta spending over $1 billion annually on AWS.