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Meta Platforms (META) may not be the most popular of the Magnificent Seven group. Past scandals, rampant metaverse spending, macro headwinds facing the ad business, and a general distaste for its founder and CEO, Mark Zuckerberg, are just a few reasons why Meta may not be No. 1 on your list of Magnificent Seven companies.
Add the scorching-hot year-to-date rally in the stock into the equation, and it seems like Meta may be one of the pricier plays in the group, and potentially more vulnerable to a broader tech market pullback.
Love Meta or hate it, the company has found a way to monetize new technologies rapidly in a way that few other firms have. Even into maturity, the firm has effectively leveraged its powerful social media network. Indeed, we hear about the power of “network effects” all the time when it comes to breaking into new markets.
Meta's Network Makes It One of the AI Stocks To Beat
As a company that has a user network that's measured in the billions, it's hard to argue that Meta may be one of the biggest winners as it looks to nudge users into new digital realms - from the metaverse to other "flavors" of social media (think Reels) and even next-generation generative artificial intelligence (AI).
Not only does Meta have the user base, but it also has the data - which serves as a sky-high moat that no rival can penetrate. That said, the social media Family of Apps may be getting a tad long in the tooth when it comes to growth.
With nearly 3 billion users on Facebook, there's only so much room to double its user count before it has almost all of the global population. But while Facebook may not be the growth engine it once was, it still serves as a profoundly powerful platform that could help ease the company's transition into the metaverse and everyday consumer-facing generative AI technologies, like large language models (LLMs).
It's hard to avoid the buzz created by ChatGPT. There's no shortage of companies that aim to have the one chatbot to rule them all. Amid rising competition in the space, I believe mega-cap tech has the edge. Not only do they have the financial firepower to outlast smaller firms and startups in the age of high interest rates, but they also have the data edge.
Arguably, Meta has one of the biggest data advantages with its Family of Apps. Indeed, the secret is out: we all know we're offering our data to Meta when we're glued to Facebook or Instagram. It's how the firm can keep the service free of charge. As we move into the age of AI, the value of this data stands to skyrocket, in my opinion, regardless of how it's put to use.
Moving forward, Meta is likely to be cautious in how it leverages user data. The penalties for going behind a user's back are now more severe. As such, the company will likely be far more transparent when it comes to how it plans to use data, especially if there's an AI model involved.
Recently, a spokesperson for the firm said it's using public Instagram photos and Facebook posts to help train its new AI, while leaving private posts alone. Indeed, it seems like Meta did learn its lesson, which bodes well for the firm as it moves further into the AI waters.
Meta's New (and Coming) Generative AI Offerings Are Impressive
Recently, Meta launched its new AI Experiences across its Family of Apps and devices. The update includes generative AI stickers (a really cool feature to use on WhatsApp!), AI-driven image editing, and even a new assistant called Meta AI. Indeed, the AI capabilities are impressive and go to show how capable the company is as an AI heavyweight.
Looking ahead, the company's most ambitious feature (AI chatbot characters with unique personalities) could arrive. Whether such a new offering brings younger users back to Facebook, though, remains to be seen. I think there's a good chance it could, if the company's cutting-edge AI tech meshes with charming personalities.
Indeed, I think chatbots could be the biggest leap in generative AI since the rise of ChatGPT. As such, investors should not discount Meta's AI pursuits, as it looks to put its foot on the gas to leave the rest of the FAANG cohort behind when it comes to AI innovation.
All things considered, Meta stands out as not only one of my favorite Magnificent Seven stocks, but one of the most impressive AI plays in the entire market.
The Bottom Line
It's hard not to love Meta stock as a top horse to bet on for the AI race. Right now, it's storming out of the gate. And the 29 times trailing price-to-earnings multiple may not be doing the stock enough justice.
Sure, the stock's up 162% year to date. But many analysts think there's more upside to come, thanks to AI.
On the date of publication, Joey Frenette did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
