Meta Platforms stock has managed an extraordinary runs of gains, placing the social media giant well ahead of its megacap tech rivals so far this year. Its growing advantage in artificial intelligence is a big reason.
Virtually all of the so-called Magnificent Seven tech stocks have been influenced by the AI investment theme. Meta, however, has found a way to power through some of the market’s broader concerns over the new technology to add nearly $500 billion in value over the past 50 days.
In fact, on Tuesday, Meta’s shares (briefly) topped the $700 mark for only the third time since early February.
The Palo Alto, Calif.-based group is making massive investments in AI, including a move to secure its own energy source through a 20-year nuclear power deal with Constellation Energy. Meta company is also reportedly looking to close the gap on rivals such as Microsoft and Google parent Alphabet through a $10 billion investment in data labeling group Scale AI.
That kind of confidence has powered the stock firmly higher over the past two months.
Meta told investors in late April that it plans to spend as much as $72 billion in capital expenditures this year. Most of that is linked to AI projects, as the company looks to exploit what CEO Mark Zuckerberg called the “staggering” opportunities in the new technology.
Zuckerberg has shifted from his earlier focus on the metaverse—losses in its Reality Labs division, the home of the ill-fated attempt, are approaching $70 billion. He instead is now finding a more open playing field in the world of AI.
Meanwhile, Apple, a longtime thorn in Meta’s side through its restrictions on targeting ads through its devices, has failed to capture the market’s AI imagination. That leaves the trillion dollar space without a clear leader.
Meta might be better-positioned than most to fill that role, given the near four billion monthly active users across its so-called “Family of Apps,” which includes Facebook, Instagram, and WhatsApp.
The Facebook parent also generates the bulk of its revenue from ad sales, with last quarter’s tally topping $41 billion—providing it with a comfortable cushion to allow for the longer time frame it will need to monetize its AI investments.
That said, a slowing economy, or a business outlook blunted by tariff uncertainty, could eat into overall revenue, which is currently pegged to grow 16% from last year to around $46 billion.
Changing search habits, ironically tied to AI advancements, are also threatening a raft of online publishers, according to a Wall Street Journal report published Tuesday, as users opt for Chatbot results’ clickable links.
Meta is looking to counter that evolution by allowing businesses and brands to create their own ads with AI tools—that it will supply, of course.
But that dovetails into another key risk, which resurfaced last month when the Federal Trade Commission made its final plea in a long-running antimonopoly case against Meta.
No formal ruling is expected until the end of the year, and even then, it could take many years after that to ultimately conclude if U.S. District Judge James Boasberg sides with the FTC’s allegations, which Meta has denied.
The company is expected to post its second-quarter earnings update in late July, with investors looking for updates on how AI is driving ad performance, developments in its WhatsApp business platform, and user growth rates in its newly-launched Meta AI app.
“We believe Meta’s efforts in building stronger AI infrastructure and LLM development to use AI technology for product improvement fully present great monetization opportunities in the long run with lower costs,” Phillip Capital analyst Serena Lim wrote in a recent research update.
Meta shares were last marked 0.55% higher on the session Tuesday and changing hands at $697.76 each, a move that would extend the stock’s 2025 advance to just over 19%.
Write to Martin Baccardax at martin.baccardax@barrons.com
