Meta considers Perplexity AI acquisition before Scale AI investment - Bloomberg

Tech stocks were lower Friday afternoon, with the Technology Select Sector SPDR Fund (XLK) down 0.6% and the SPDR S&P Semiconductor ETF (XSD) decreasing 1.1%.

The Philadelphia Semiconductor index was shedding 1%.

In sector news, a US official has told major global chipmakers that he wanted to revoke waivers that allow them to ship US chip-making equipment to their factories in China without individual licenses, The Wall Street Journal reported Friday.

In corporate news, Reddit is considering implementing World ID, a system that verifies users on its platform are real individuals while still providing anonymity, Semafor reported. Reddit shares were down 1.3%.

Couchbase shares jumped past 29% after the company said Friday it has agreed to be acquired by Haveli Investments in an all-cash deal valued at about $1.5 billion.

Meta held talks with Perplexity AI about a possible takeover before making a multibillion-dollar investment in Scale AI, Bloomberg reported. Meta shares were down 1.6%.

By Angela Palumbo

Micron Technology stock, far outpacing the Nasdaq Composite this year, could rise further if demand for its artificial intelligence-powered memory remains strong, an analyst says.

Micron makes memory and storage solutions, including high-bandwidth memory for AI. The demand for high-bandwidth memory has been growing as the need to power AI data centers by hyperscalers, such as Microsoft and Amazon.com, rises.

Shares of Micron have risen 45% this year as Wall Street bets that demand for its high bandwidth memory continues. Wedbush analyst Matt Bryson has confidence that the stock can go even higher. He raised his price target on the stock to $150 from $130 while maintaining an Outperform rating ahead of third-quarter earnings, which are scheduled for June 25. That new price target implies a 23% increase from the stock's last closing price of $121.82.

"Better fundamentals in our view are driven by a pickup in enterprise/server demand that started in the April timeframe and looks to hold through the rest of the year as demand for both AI and standard workloads appears to be better than might have been initially anticipated," Bryson wrote on Friday.

Morgan Stanley analyst Joseph Moore rates Micron as Equal Weight with a $98 price target. He wrote in a research note on Friday that he doesn't recommend buying the stock, given how much it has rallied this year already. However, he's "tactically bullish given the material acceleration we are seeing in AI spending as Micron grows its participation."

Tech giants are spending massive amounts of money to build out AI infrastructure. For 2025, Meta Platforms expects capex of $64 billion to $72 billion, while Alphabet expects capex of $75 billion. That large volume of capital going into AI investments is a good sign for companies making AI hardware, like Micron.

"Micron's AI exposure set to double between now and the end of FY25, a tailwind to revenue/margins/EPS," Moore wrote.

Shares of Micron were up 0.8% to $122.82 on Friday.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Meta Platforms held talks with Perplexity AI about a possible takeover before making a multibillion-dollar investment in Scale AI, Bloomberg reported Friday, citing people familiar with the matter.

Meta and Perplexity couldn't reach an agreement and decided not to pursue a deal, the report said.

Meta didn't immediately reply to a request for comment from MT Newswires.

A handful of tech giants have signed deals with nuclear energy companies in recent months to meet outsized electricity demand amid the artificial intelligence boom, but they have been opting for one of two distinct paths: new and innovative versus old and reliable.

Microsoft kicked off the dealmaking rush in September 2024, announcing a 20-year energy agreement with Constellation Energy that will pave the way for the revamp and restart by 2028 of Three Mile Island Unit 1 in Pennsylvania under the new name Crane Clean Energy Center. Under the terms of the deal, Microsoft will purchase energy from the renewed plant, which is expected to add more than 800 megawatts of electricity to the grid.

That agreement was followed by deals announced in October by Amazon.com and Alphabet's Google with companies producing next-generation nuclear technology in the form of small modular reactors, or SMRs.

Google announced its clean energy agreement with Kairos Power on Oct. 14. Under the terms of the deal, the first of its kind, Google will purchase nuclear energy from multiple SMRs to be developed by Kairos, with the stated goal of bringing the first SMR online by 2030, followed by additional SMR deployments through 2035. The deal will enable up to 500 megawatts of carbon-free power to US electricity grids, Google said.

Two days later, Amazon and Energy Northwest, a public power agency, announced an agreement to fund efforts to deploy SMRs in Washington state developed by X-energy. Under the deal terms, Amazon will have the right to purchase electricity from the first project, consisting of four SMR modules, which is expected to generate 320 MW of energy capacity starting in the early 2030s.

Meta Platforms and Constellation announced a 20-year deal on June 3 in which the tech giant agreed to buy electricity from Constellation's Clinton Clean Energy Center in Illinois. Under the terms of the agreement, the Clinton plant will provide Meta with 1,121 MW of energy starting in June 2027.

Deals like those made by Microsoft and Meta to secure energy from existing nuclear plants may be the more practical option in the nearer term for big tech companies that are engaged in a generative AI arms race requiring significant amounts of electricity to power their data centers, experts said.

"Momentum among experts is shifting back toward the large plants because economies of scale are real and costs matter — large-scale has significant cost advantages over small-scale," said Rob Gramlich, president of Grid Strategies, a Washington, D.C.-based consultancy. "That said, small modular reactors have the advantage of the prospect that you could manufacture them onsite and get all the efficiencies of manufacturing. That's real, and, of course, there's a risk advantage with [SMRs] because the cost of a large unit is arguably too big for any one company to absorb."

Neither revitalizing and restarting existing plants nor a few SMR projects will come close to meeting data-center demand on their own, experts said. Global power demand from data centers will increase by 50% by 2027 and by as much as 165% by the end of the decade compared to 2023, Goldman Sachs Research said in a note. That means many new reactors — big and small — will need to be built, a costly, time-sensitive proposition.

"Almost all of [the play for nuclear] is long term," Gramlich said. "You're not going to get a new plant, conventional or advanced, this decade."

New, large nuclear reactors would be equipped with advanced technology matching that of SMRs, said Stephen Comello, senior vice president of strategic initiatives at the EFI Foundation, in an interview.

"Just because they're big, it doesn't mean they're dumb," he said, citing two new units being added to Plant Vogtle in Georgia that will utilize the Westinghouse AP1000 reactor technology as an example.

Future AP1000 builds will be costly at around $10 billion and take a long time to construct — roughly six to seven years — but they have the institutional knowledge advantage over SMRs, Comello said.

"The good thing with large reactors, we've already built them, there already have been lessons learned ... (we) already have licenses approved and the supply chain is pretty much there," he said. "SMRs may cost less, financing might be less, but the technical risk profile is not the same. We haven't built SMRs before, and we're bound to encounter some in-construction updates no matter how well they're planned for."

SMRs also still need to procure certain licenses certifying they work as intended and meet safety specifications, all steps AP1000s have already achieved. Once the first few SMRs are built, those reactors may become far faster to build and less risky from a cost perspective, Comello said.

Either way, it will be a while before nuclear output scales to the point where it can better meet the needs of data centers. In the meantime, big tech will have to continue to rely heavily on fossil fuels and less-productive renewables.

"They'll get grid power, which, depending on the region, will be a lot of gas, at least a third, sometimes half, a fair amount of solar and wind, and probably some coal," Grid Strategies' Gramlich said.