Meta Platforms: Top AI Stock?

Meta Platforms: An AI Stock to Consider

Artificial intelligence (AI) has become increasingly popular recently. One company that is capitalizing on AI is Meta Platforms, the parent company of Facebook. Here are three reasons why it could be a top AI stock.

Meta's AI Initiatives

Meta Platforms' AI initiatives include Meta AI, a chatbot first released in late 2023. Almost two years later, Meta AI has nearly 1 billion monthly active users.

Advantage of Existing Ecosystem

Meta Platforms has a vast ecosystem of users across its websites and apps. As of the first quarter, Meta Platforms had 3.4 billion daily active users. Meta Platforms can depend on its brand name and existing ecosystem. Meta Platforms will eventually find ways to monetize Meta AI. In the meantime, the technology is driving greater engagement on Instagram and Facebook, leading to stronger ad revenue. The company's ecosystem will remain a significant strength in the AI race.

Investment in AI Infrastructure

The technology requires significant computing power, and Meta Platforms is investing heavily in ensuring it isn't left behind. Management has stated its intentions to invest in AI infrastructure-related expenses over the long term. In the first quarter, the company's cost of revenue jumped due to higher infrastructure expenses. The company's revenue increased to $42.3 billion. Meta Platforms' earnings per share jumped to $6.43. Its free cash flow for the period came in at $10.33 billion.

Beyond AI

Meta Platforms' work in AI also includes hardware devices such as glasses. CEO Mark Zuckerberg is predicting that AI glasses will become the norm. Within its core business, advertising should remain its most significant growth driver. The digital ad space is still on an upward trajectory. The company is ramping up business messaging on WhatsApp and is still working on the metaverse. Together with AI, those opportunities make Meta Platforms' prospects highly attractive.

Potential Risks

Meta Platforms' results could suffer due to the macro environment. In the first quarter, the company reported that Asian-based e-commerce businesses decreased ad spending. The company could also see a decrease in ad revenue if the economic situation worsens significantly. However, Meta Platforms' long-term prospects are strong despite these potential headwinds. The company's vast ecosystem and multiple growth paths should more than make up for an occasionally weak economy. The stock is well-positioned to deliver market-beating returns thanks to its work in AI and other industries.