Meta Platforms, down 29% from its peak, stands out as a promising AI stock to buy amidst a stock market slump. The company benefits from its position as a “hyperscaler,” focusing on AI development without the pressure of cloud rental services. Despite advertising uncertainties, its strong audience targeting and ongoing AI enhancements suggest long-term growth potential. Analysts predict positive earnings amid economic challenges, making now a good time to invest in Meta.
In the current turbulent stock market, AI stocks are getting hit pretty hard, many down 25% or more. The situation is pretty daunting, with fears of recession and growing tariffs making the tech playground rougher. Companies plowing money into AI may find their investments feeling heavier and less rewarding over the next few quarters. So, which AI stock stands out as a worthwhile buy right now? Surprisingly, it’s Meta Platforms, currentlyvalued 29% below its peak earlier this year.
Why is Meta catching the eye of investors? Well, it’s among the “hyperscalers,” those colossal firms outfitting massive data centers with GPUs to boost AI training and smarts. Interestingly, unlike other hyperscalers, Meta doesn’t offer cloud services to rent out its compute. This could be a silver lining in an uncertain economy, letting Meta focus on enhancing its product rather than worrying about fluctuating customer budgets.
Sure, Meta isn’t completely off the economic hook. Advertisers tighten their belts during downturns, which can impact revenue. But history shows Meta handles these storms better than many in advertising. Thanks to a vast audience and precise targeting, advertisers find it valuable even when funds are scarce. Plus, their continuous AI improvements will only strengthen this edge.
Then there’s the massive potential AI holds for Meta’s future. With work on AI algorithms dating back over a decade, things are really picking up speed. The launch of Reels—a competitor to TikTok—demanded serious tweaks to their recommendation algorithm, which have paid off. They’ve learned that broader algorithms can capture more engagement, leading to better ad views and clicks.
And there’s more good news. Meta’s adding generative AI features into its ad tools, like the Advantage+ campaigns, which tailor ads for specific marketing goals. As of late January, around four million advertisers were already on board, and this could explode as the AI refines its skills. It’s about maximizing ad efficiency while reducing ad campaign costs—a win-win!
But ads aren’t the whole story. There’s also Meta’s ambitious AI chatbot, Meta AI, aiming for a billion users. It’s already past 700 million! The hope is to monetize it with personalized features. On top of that, Meta is developing AI agents for Messenger and WhatsApp to assist businesses with customer service and sales, potentially driving further revenue through targeted ads.
The use of AI-generated content is also brewing at Meta. They’ve dabbled with posting AI content on Instagram and Facebook, which might pull in more users towards their chatbot. This could lead to greater user engagement and—surprise!—more advertising opportunities.
Despite the looming risks tied to possible economic slowdowns, investors might find Meta’s stock a great buy at today’s prices. Currently, it’s under a price-to-earnings ratio of 22, which seems like a bargain compared to its historical valuations, especially when considering the growth potential ahead.
Analysts are understandably wary about how much the ramp-up in AI spending might strain profits this year. With expenses climbing faster than revenue, operating margins are taking a hit. Still, they expect Meta to endure, potentially showing positive earnings thanks to their major share repurchase efforts. By 2026, we could see a much healthier financial picture for the firm as it gets a handle on its AI expenses.
For long-term thinkers, Meta’s investment in AI and its current low stock price could be a golden chance. With shares well off their peaks, it seems like a wise moment to jump back into this tech giant.
In summary, while Meta Platforms faces headwinds from the broader economic climate, its strong history and position in the advertising space make it a considerable buy during the current stock sell-off. With its focus on AI advancements and solid audience engagement strategies, the company could weather financial challenges better than most. Investors hunting for reasonable prices coupled with growth potential might want to turn their attention to Meta now while the opportunity is ripe.
Original Source: www.fool.com
