Mark Zuckerberg Is Turning Meta Into a Bigger Chipmaker. Its Newest In-House AI Chip Enters Production in September.

Shares of Meta Platforms (META +6.16%) rose about 6% on Friday after Reuters reported on Thursday that the social media giant plans to start manufacturing its own data-center AI (artificial intelligence) chip in September. The chip, code-named Iris, was designed with help from Broadcom (AVGO 0.31%) and will be built by Taiwan Semiconductor Manufacturing (TSM 0.55%), according to an internal memo the news organization reviewed.

The market's enthusiasm is easy to understand. Meta expects to spend as much as $145 billion on AI infrastructure this year, and that spending has been my biggest concern with the stock. Custom silicon is aimed squarely at getting more computing power out of every one of those dollars.

So, what does Meta's expanding chip program mean for the stock?

Image source: Getty Images.

The chip program is moving fast

Iris is reportedly part of a four-generation family of chips Meta is designing in-house, and the program appears to be ahead of where many investors probably assumed. Testing on the chip took about six weeks and turned up no major issues, according to the memo.

Even more, Meta reportedly plans to launch a new chip about every six months through 2027. That is a much faster cadence than the industry norm of about one new chip per year.

And the infrastructure these chips would support is enormous. Meta plans to bring about 7 gigawatts of computing capacity online this year and double its total to 14 gigawatts in 2027, according to the report, with Iris augmenting the graphics processing units (GPUs) the company buys from Nvidia and Advanced Micro Devices rather than replacing them.

Still, there's a message here for chip investors. One of the AI boom's biggest spenders just showed a credible path to needing Nvidia somewhat less over time -- while handing more business to Broadcom, which helps design the chip, and TSMC, which builds it.

Nvidia's chips remain the backbone of Meta's computing plans. But every in-house chip Meta deploys is pricing pressure Nvidia could eventually feel.

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NASDAQ: META

Meta Platforms

Today's Change

(6.16%) $38.92

Current Price

$670.40

Key Data Points

Market Cap

$1.6TMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.Market cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$658.01 - $677.85

52wk Range

$520.26 - $796.25

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2.3M

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17.3M

Gross Margin

81.94%

Dividend Yield

0.33%

The business paying the bill

None of this spending would matter much to shareholders if Meta's core business were sputtering. It isn't.

Meta's first-quarter revenue rose 33% year over year to $56.3 billion -- an acceleration from 24% growth in the fourth quarter of 2025 and 22% growth for full-year 2025. And the profits followed. The company posted a 41% operating margin for the period, and earnings per share of $10.44 grew 62% year over year, though a one-time $8.03 billion tax benefit added $3.13 per share to that figure. For a company of Meta's size, growth like this is extraordinary.

"We had a milestone quarter with strong momentum across our apps and the release of our first model from Meta Superintelligence Labs," said CEO Mark Zuckerberg in the company's first-quarter earnings release.

That growth is what pays for the build-out. In its first-quarter update, Meta raised its 2026 capital expenditure forecast to a range of $125 billion to $145 billion (up from a prior range of $115 billion to $135 billion) while guiding for second-quarter revenue of $58 billion to $61 billion. Capital expenditures in the first quarter alone were $19.8 billion.

Of course, custom chips don't mean a smaller budget. And a reported timeline may still slip. Even if Iris works exactly as planned, Meta isn't cutting its spending. It's doubling its computing capacity and trying to make each unit of that capacity cost less. If the AI investments don't ultimately produce more engagement and better ad economics, in-house silicon may not be enough to offset challenges the company could face down the road.

But the price investors are paying for this story looks reasonable. At about $672 per share as of this writing, Meta trades at about 24 times earnings and about 19 times forward earnings, even though Meta grew revenue 33% last quarter. And unlike a chip supplier, Meta also controls the applications that all of that computing power serves. If the in-house chips deliver even part of the potential savings, the company's heavy spending could convert into earnings growth faster than the market currently expects.

To me, the stock looks attractive here. Sure, Thursday's report probably doesn't lower Meta's AI bill. But it strengthens the case that the company can control the cost of a build-out it was going to attempt anyway.