Meta Platforms: A Top AI Stock to Buy
Artificial intelligence (AI) is revolutionizing the tech landscape, and Meta Platforms (META 0.49%) is at the forefront of this revolution. As the parent company of Facebook, Meta Platforms boasts an enormous ecosystem of users across its various websites and apps. Here are three compelling reasons why Meta Platforms is a top AI stock to buy.
- 3.4 Billion and Counting: Meta Platforms’ AI initiatives, including Meta AI, a chatbot released in late 2023, have been remarkably successful. With nearly 1 billion monthly active users, Meta AI’s rapid growth is largely attributed to the company’s vast existing user base. As of the first quarter, Meta Platforms had 3.4 billion daily active users across its platforms.
This massive ecosystem is a significant advantage for Meta Platforms, allowing it to scale AI services quickly without relying on expensive user acquisition methods. While Meta AI currently generates minimal revenue, it is driving greater engagement on Instagram and Facebook through AI-powered recommendations, leading to stronger ad revenue. Meta Platforms plans to eventually monetize Meta AI, following a similar strategy that worked with WhatsApp.
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Doubling Down on AI: Being a leader in AI deployment is capital-intensive, requiring substantial computing power. Meta Platforms is investing heavily in AI infrastructure, with management committing to hundreds of billions of dollars in long-term expenses. In the first quarter, the company’s cost of revenue increased by 14% year over year, primarily due to higher infrastructure expenses. However, Meta Platforms can afford these investments, having reported a 16% year-over-year revenue increase to $42.3 billion and a 37% jump in earnings per share to $6.43.
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Other Growth Opportunities: Meta Platforms’ AI work extends beyond software to hardware devices like AI-powered glasses. CEO Mark Zuckerberg predicts that AI glasses will become mainstream within five to ten years. Additionally, the company’s core advertising business remains a significant growth driver, with the digital ad space continuing to grow. Meta Platforms is also ramping up business messaging on WhatsApp and working on metaverse projects, providing multiple growth paths.
While macroeconomic factors may impact Meta Platforms’ short-term results, the company’s long-term prospects remain strong. Its vast ecosystem and diverse growth opportunities, including AI, advertising, and the metaverse, position it for market-beating returns. Despite potential risks, Meta Platforms is well-positioned to capitalize on the AI revolution and deliver substantial value to investors.
