Investing

3 Reasons AI Could Make Meta a Generational Stock

Joey Frenette

Published: August 31, 2024 8:27 am

Meta Platforms (NASDAQ:META) stock has been outpacing most of its Magnificent Seven peers over the past two years, now up more than 224%. Undoubtedly, the glorious recovery of those now-distant 2022 lows is primarily thanks to its bold bets on artificial intelligence (AI) technology.

It’s not just the AI promise that makes Meta one of the better Magnificent Seven stocks to own for AI exposure, though. The company’s already beginning to monetize AI in significant ways. And with new AI-powered offerings to come, perhaps it’s Meta that stands to rise as one of the more prominent winners from the AI boom as it shows us that generative AI can, in fact, result in substantial earnings growth outside of the wild world of semiconductors.

Key Points About This Article

• Meta is investing heavily in AI with future profitability in mind.
• As the firm brings AI to new industries, its growth prospects may still be undervalued.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Indeed, playing the so-called “picks and shovels” AI chip stocks has been a terrific early way to profit from the AI boom. Whether it’s too late to get in on that action remains to be seen. Nvidia (NASDAQ:NVDA) stock’s recent plunge (it’s down close to 7% in the after-hours session) following its incredible 122% revenue surge suggests it’s time we look beyond just picks and shovels for the types of companies that can most effectively use such tools to unlock value and jolt earnings growth.

Though it’s not entirely clear how various tech titans will leverage AI to unlock economic gains over the longer term, I think investors seeking early hints at where the industry could be headed next should look at Meta. Here are three reasons Meta could be the generational AI company to buy, hold, or monitor.

An AI Advertising Service Could Be Big

Meta CEO Mark Zuckerberg thinks AI will “revolutionize” ad services. Meta’s Advantage+ AI ad tools have arguably already changed the world of digital advertising as we know it. As the AI tool’s smarts improve, I expect ad performance will increase while the need for human interaction decreases. Undoubtedly, Meta seems to have efficiency and automation down with Advantage+.

Notably, the latest updates included a slew of new features to level up the personalization factor. More personalization likely translates to better conversion, making it a must-have for firms looking to stay ahead of the competition.

Indeed, Meta has done a fantastic job of integrating AI to improve the value of its ads. Arguably, Meta boasts some of the world’s best talent in AI applied to advertising. As we shift from targeted ads to increasingly automated AI-incorporating hyper-personalized ads, Meta stands to gain further.

The Metaverse Has Struggled to Take Off. AI Could Give It a Boost

Meta’s name still suggests it views the metaverse as one of the next big things in the tech world. Otherwise, it would have probably renamed itself by now to reflect its newfound AI focus. Meta is still keen on building new virtual worlds to entertain future generations looking beyond today’s traditional social media platforms. However, it’s had to lift its foot off the pedal slightly.

Recently, Meta pulled the plug on its augmented reality (AR) tool Meta Spark. Reportedly, hundreds of millions used the tool. As the firm looks to become more efficient on metaverse expenditures as it plays the really long game, such moves are to be expected. Indeed, Meta likely sees a better way to do things on the AR front. My guess is that an AI-first product could succeed Spark and other tools like it.

As for the metaverse’s breakout moment, we may still be a decade or two away from having such efforts result in some form of big payoff. If Meta can tailor AI for the metaverse as well as it has for ads, perhaps the metaverse boom could arrive by the decade’s end.

Meta AI Has More Than a Puncher’s Chance of Topping ChatGPT

Finally, Meta is betting big on the future of its LLaMA large language model (LLM). The latest version, LLaMA 3.1, fares quite well against heavy hitters such as ChatGPT-4. Though still early, Meta’s commitment to advancing its open-source LLM suggests it’s in the “front pack” in this ongoing AI race.

While Meta may not be able to put a “Meta AI” button on your keyboard as Microsoft (NASDAQ:MSFT) has with Copilot, let’s not forget that its LLM is never too far away from its average user. For the many folks tuned into Instagram, Facebook, WhatsApp, or even the metaverse in its current state, quick and easy access to Meta AI will never be too far off.